Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Friday, May 1, 2009

Competition Between Payment Systems: Results

Posted by D. Daniel Sokol

George Gardner (Reserve Bank of Australia) and Andrew Stone (Reserve Bank of Australia) analyze Competition Between Payment Systems: Results.

ABSTRACT: This paper is the second of two companion pieces. In the first we developed a model of competition between payment systems which extends that of Chakravorti and Roson (2006). Here we turn to the results which can be obtained from the Chakravorti and Roson model, from our extension of it, and from a third family of models which we develop in this paper. We obtain two main sets of findings.

First, we shed further light on how competing platforms will set their price level and pricing structure when endogenous multi-homing is allowed on both sides of the market. Our results challenge the general finding in the literature that the greater the propensity of one side of the market to single-home, the more attractive will be the pricing offered to its members by competing platforms. Our results confirm that while this finding generally holds when platforms charge both consumers and merchants on a purely per-transaction basis, it need not hold in the more realistic situation where platforms instead levy flat fees on consumers. Second, we extend findings of Hermalin and Katz (2006) showing that, in certain circumstances, platforms may offer less attractive pricing to the side of the market which holds the choice of payment instrument at the moment of sale.

May 1, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 30, 2009

Measurement of the Consumer Benefit of Competition in Retail Outlets

Posted by D. Daniel Sokol

Toshiyuki Matsuura (Economics, Keio University) and Mitsuru Sunada (Competition Policy Research Center, Japan Fair Trade Commission) address Measurement of the Consumer Benefit of Competition in Retail Outlets in a new working paper.

ABSTRACT: In this paper, we estimate the consumer benefits of competition in the retail industry. In our analysis, we incorporated the service quality of retail outlets as outputs. In Japan, in the process of the deregulation of entry restriction on large-scale retail stores, specialty supermarkets have increased their market share with a low price strategy. At the same time, despite their high prices, convenience stores have increased their market share through 1990s. We demonstrate changes in market share for each retail format are explained by the changes in each formats respective service quality.

April 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered

Posted by D. Daniel Sokol

Christian A. Ruzzier (Harvard Business School) addresses Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered.

ABSTRACT: A point repeatedly stressed by transaction cost economics is that the more specific the asset, the more likely is vertical integration to be optimal. In spite of the profusion of empirical papers supporting this prediction, recent surveys and casual observation suggest that higher levels of asset specificity need not always lead to vertical integration. The purpose of this paper is to uncover some of the factors driving firms to (sometimes) choose to remain separated, rather than integrate, in the presence of high specificity. Its main economic message is that in a world where outside options matter and investments are multidimensional, high levels of asset specificity can foster nonintegration: a low level of specificity provides the most misdirected incentives when transacting in a market (because the outside option of external trade becomes so tempting), thus making a stronger case for nonintegration when specificity is high. 

April 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 29, 2009

2008 Annual Review of Antitrust Law Developments

Posted by D. Daniel Sokol

The ABA Antitrust Section has just published the 2008 Annual Review of Antitrust Law Developments.

BOOK ABSTRACT: For over 36 years, Antitrust Law Developments and its annual supplements have been recognized as the single most authoritative and comprehensive set of research tools for antitrust practitioners. The 2008 Annual Review of Antitrust Law Developments summarizes developments during 2008 in the courts, at the agencies, and in Congress.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

An Empirical Model of Search with Vertically Differentiated Products

Posted by D. Daniel Sokol

Matthijs R. Wildenbeest (Indiana University, Kelley School of Business) provides An Empirical Model of Search with Vertically Differentiated Products.

ABSTRACT: This paper presents a non-sequential search model that allows for vertical product differentiation. In the unique symmetric equilibrium forms with different characteristics draw utilities from a common utility distribution, resulting in asymmetric price distributions. The model therefore provides a theoretical rationale for explaining price dispersion as a result of quality differences and search frictions together. More specifically, the model can explain the frequent and asymmetric price changes reported in several empirical papers, but also why some firms have persistently higher prices than others. Using the equilibrium conditions derived from the model, we show how to estimate search costs by maximum likelihood using only prices. The method is applied to a data set of prices for grocery items from supermarkets in the UK. Estimates reveal that most of the observed price variation can be explained by supermarket heterogeneity and that the estimated amount of search is low in this market. We show that ignoring vertical product differentiation results in an overestimation of search costs. Moreover, estimated search costs using a basket of organic items are on average higher than that of a similar non-organic basket. We also simulate how changes in search costs will affect behavior of stores and consumers.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

Financial Market Pressures, Tacit Collusion and Oil Price Formation

Posted by D. Daniel Sokol

A team of Finn Roar Aune (Statistics Norway), Klaus Mohn (University of Stavanger - Industrial Economics), Petter Osmundsen (University of Stavanger - Industrial Economics) and Knut Einar Rosendahl (Statistics Norway) investigate Financial Market Pressures, Tacit Collusion and Oil Price Formation.

ABSTRACT: We explore a hypothesis that a change in investment behaviour among international oil companies (IOC) towards the end of the 1990s had long-lived effects on OPEC strategies, and on oil price formation. Coordinated investment constraints were imposed on the IOCs through financial market pressures for improved short-term profitability in the wake of the Asian economic crisis. We apply a partial equilibrium model for the global oil market to compare the effects of these tacitly collusive capital constraints on oil supply with an alternative characterised by industrial stability. Our results suggest that even temporary economic and financial shocks may have a long-term impact on oil price formation.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

Antitrust Law and Economics Professors on the Move

Posted by D. Daniel Sokol

For the second year, I hope to compile a list of antitrust professors in law and economics who are on the move to new schools.  Please submit names in the comments section below any moves (entry level or lateral). Also include any upcoming visits for the 2009-10 academic year.  This list is not exclusive to North America so please feel free to include any moves elsewhere in the world.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

DOJ Opens Antitrust Inquiry Into Google Books Deal

Posted by D. Daniel Sokol

Last week I posted an interesting new working paper by Randy Picker on the antitrust implications of Google Books.  Today we learn via the NY Times that DOJ is investigating the deal.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

The Interface Between Regulation and Competition Law

Posted by D. Daniel Sokol

Neelie Kroes (European Commissioner for Competition Policy) gave as speech yesterday on The Interface Between Regulation and Competition Law.

April 29, 2009 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 28, 2009

Section 2 and the Section 2 Report

Posted by D. Daniel Sokol

Our friends over at Truth and the Market will host an online symposium on Section 2 and the Section 2 Report.

As Geoff Manne wrote me:

We’ve organized the symposium across the three days so that each day will have a different emphasis. The first day, Monday the 4th, we’ll discuss some introductory themes and set the context with some more-broadly-oriented perspectives on the Section 2 Report, including the enforcement perspective from inside the antitrust agencies and economists’ views, among others. The second day, Tuesday the 5th, we’ll devote to the general Section 2 standards debate. And we’ll finish up on Wednesday the 6th focusing on specific substantive areas, tracking the Section 2 Report and its substantive content in greater depth and detail.


The participants:
Alden Abbott, FTC
Tim Brennan, University of Maryland
Dan Crane, Cardozo/Michigan Law
David Evans, LECG/UCL/Chicago Law
Herbert Hovenkamp, Iowa Law
Keith Hylton, BU Law
Bruce Kobayashi, George Mason Law
William Kolasky, WilmerHale/former DAAG
Thom Lambert, Missouri Law/Truth on the Market
Tad Lipsky, Latham & Watkins/former DAAG
Geoffrey Manne, LECG/Lewis & Clark Law/Truth on the Market
Howard Marvel, Ohio State
Bill Page, Florida Law
Michael Salinger, BU/LECG/former Director, Bureau of Economics, FTC
Josh Wright, George Mason Law/former Scholar-in-Residence, FTC/Truth on the Market

April 28, 2009 | Permalink | Comments (0) | TrackBack (0)

How Competition Policy Benefits SMEs

Posted by D. Daniel Sokol

Neelie Kroes (European Commissioner for Competition Policy) recently gave a speech on How Competition Policy Benefits SMEs.

April 28, 2009 | Permalink | Comments (0) | TrackBack (0)

FTC Issues Final Rules Amending Parts 3 and 4 of the Agency’s Rules of Practice

Posted by D. Daniel Sokol

In an important practice development, the FTC Issued Final Rules Amending Parts 3 and 4 of the Agency’s Rules of Practice.  The press release notes:

The Federal Trade Commission today adopted as final the interim rules amending Parts 3 and 4 of the agency’s Rules of Practice that were announced last December, and also further amended several rules and eliminated one. The amendments are designed to streamline and improve the agency’s “Part 3” adjudicative proceedings. They expedite the prehearing, hearing, and appeal phases; streamline discovery and motion practice; and ensure that the FTC can apply its substantive expertise, as appropriate, earlier in the process.

April 28, 2009 | Permalink | Comments (0) | TrackBack (0)

Competition Between Payment Systems

Posted by D. Daniel Sokol

George Gardner (Reserve Bank of Australia) and Andrew Stone (Reserve Bank of Australia) analyze Competition Between Payment Systems.

ABSTRACT: This paper is the first of two companion pieces examining competition between payment systems. Here we develop a model of competing platforms which generalises that considered by Chakravorti and Roson (2006). In particular, our model allows for fully endogenous multi-homing on both the merchant and consumer sides of the market. We develop geometric frameworks for understanding the aggregate decisions of consumers to hold, and merchants to accept, different payment instruments, and how these decisions will be influenced by the pricing choices of the platforms. We also illustrate a new potential source of non-uniqueness in the aggregate behaviour of consumers and merchants which is distinct from the well-known ‘chicken and egg’ phenomenon – and indeed can only arise in the context of multiple competing platforms. Finally, we briefly discuss how this new source of non-uniqueness may nevertheless shed light on the ‘chicken and egg’ debate in relation to the development of new payment systems.

April 28, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, April 27, 2009

The Institutionalists’ Reaction to Chamberlin’s Theory of Monopolistic Competition

Posted by D. Daniel Sokol

Luca Fiorito (University of Palermo - Politics) discusses The Institutionalists’ Reaction to Chamberlin’s Theory of Monopolistic Competition.

ABSTRACT: Edwin Chamberlin's The Theory of Monopolistic Competition is often described as containing omportant traces of institutionalist influence. This is also confirmed by Chamberlin himself who, repeadetly, referred to the work of Veblen, and John Maurice Clark among his inspirational sources. The aim of this paper is to analyse the institutionalist reaction to the publication of the Theory of Monopolistic Competition. What will be argued is that the institutionalist response to Chamberlin was a mixed one, and involved some substantial criticisms of his analysis of market structures both on methodological and theoretical grounds. The paper is organized as follows. The first section presents a sketch of the main theoretical implications contained in The Theory of Monopolistic Competition. The second section analyses the general aspects of the institutionalist reaction to Chamberlin. The third and fourth sections deal with the more theoretical aspects of the institutionalist criticism of Chamberlin. The final section presents a conclusion.

April 27, 2009 | Permalink | Comments (0) | TrackBack (0)

9th Annual Loyola Antitrust Colloquium

Posted by D. Daniel Sokol

This Friday I will participate in the 9th Annual Loyola Antitrust Colloquium.



9th Annual Loyola Antitrust Colloquium
Friday, May 1, 2009
Loyola University Chicago School of Law
25 East Pearson Street
Chicago IL. 60611
10th Floor Ceremonial Courtroom
Schedule of Events


Friday, May 1, 2009
8:45 a.m.

Continental Breakfast and Registration

Loyola University Chicago School of Law
25 E. Pearson
10th Floor Ceremonial Courtroom
Chicago, IL. 60611

 
9:20 a.m.

Welcome

Professor Spencer Weber Waller
Professor and Director
Institute for Consumer Antitrust Studies
Loyola University Chicago
School of Law

 
9:30 a.m.

Susan Beth Farmer
Penn State University
Dickinson School of law

The Chinese Anti-Monopoly Law

Commentators:

Danny Sokol
University of Florida

Mike Jacobs
DePaul University

 
10:45 a.m. Coffee Break
 
11:00 a.m.

Mike Carrier
Rutgers-Camden School of Law

Unsettling Drug Patent Settlements: A Framework for Presumptive Illegality

Commentators:

William Conanor
University of California - Santa Barbara

Meg Simpson
Jenner & Block, Chicago IL

 
12:30 p.m. Lunch
Kasbeer Hall
15th Floor
25 E. Pearson
 
1:45
p.m.

Chris Sagers
Cleveland State University
School of Law

Antitrust Epistemology

Commentators:

Andy Gavil
Howard University

Rudy Peritz
New York Law School

 
3:00 p.m. Ice Cream Sundae Break
 
3:20 p.m.

Josh Davis
University of San Francisco
School of Law

Judicial Resolution of Contested Facts in Antitrust Cases

Commentators:

Max Huffman
Indiana University - Indianapolis

Steve Shadowen
Hangley Aronchick Segal & Pudlin
Harrisburg, PA

April 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Entry in Collusive Markets: An Experimental Study

Posted by D. Daniel Sokol

Marie Goppelsroeder, University of Amsterdam - Economics, has an interesting new paper on Entry in Collusive Markets: An Experimental Study.

ABSTRACT: In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry.

April 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Is Cartelisation Profitable? A Case Study of the Rhenish Westphalian Coal Syndicate, 1893-1913

Posted by D. Daniel Sokol

Thorsten Lübbers (Max Planck Institute for Research on Collective Goods) has a nice historical work on Is Cartelisation Profitable? A Case Study of the Rhenish Westphalian Coal Syndicate, 1893-1913.

ABSTRACT: We examine the effect of one of the presumably most powerful cartels ever on the profitability of its members. More precisely, we consider the Rhenish-Westphalian Coal Syndicate, a coal cartel that operated in Imperial Germany in the late 19th and early 20th century, using a newly constructed dataset and two different methodological approaches. At first, we employ event study methodology to asses the reaction of the stock market to the foundation of the cartel and two major revisions of its original contract. Furthermore, we look at different performance measures calculated from accounting and financial data in a dynamic panel data framework. Overall, our results suggest that the investigated cartel had no significant effect on the profitability of its members. However, we also find that it was able to stabilise coal prices and powerful enough to ensure that on average, prices were set high enough to avert negative repercussions on company performance.

April 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 26, 2009

Chilean Congress Approves Reforms to Competition Law

Posted by D. Daniel Sokol

Last week the Chilean Congress approved some major reforms to the Chilean competition system.

April 26, 2009 | Permalink | Comments (0) | TrackBack (0)