Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, January 4, 2010

Buying Access America Travel Insurance is a Waste of Money

Posted by D. Daniel Sokol

This post is a bit off the topic of antitrust and competition policy and more in the vein of consumer protection.  My parents, senior citizens, made the mistake of buying travel insurance.  I have told them in the past that travel insurance is not worth the money because the llikelihood that they will need it is small, the cost is very high, and travel insurance companies do everything possible to make successfully collecting on such a policy highly unlikely.  Did my parents listen to me?  Like many other consumers, no.  They bought travel insurance through a link on Delta.com (they were coming to visit us) with Access America.  My father unfortunately needed open heart surgery (he is fine now) and they needed to cancel the trip to see us.  Access America decided that because he had what they called a "pre-existing condition", they denied him compensation.  The "pre-existing condition" language is quite vague and one might imagine that nearly all situations might fall into their definition of pre-existing conditions. Customer service was spotty at best and they were somewhat nasty to my parents on the phone. 

At some level, Access America must realize that lots of bad publicity will hurt their business (and potentially Delta's as well by this bad association).  

The lesson to be learned by my parents is not to buy travel insurance from Access America and to listen to their son sometimes about how travel insurance is a waste of money.    

January 4, 2010 | Permalink | Comments (6) | TrackBack (0)

Strategic Under-utilization of Patents and Entry Deterrence: The Case of Pharmaceutical Industry

Posted by D. Daniel Sokol

Sugata Marjit - Centre for Studies in Social Sciences, Tarun Kabiraj - Indian Statistical Institute, and Arijita Dutta - Calcutta University, have posted a paper on Strategic Under-utilization of Patents and Entry Deterrence: The Case of Pharmaceutical Industry.

ABSTRACT: This paper seeks to explain why some pharmaceutical companies are observed to withdraw their products before patents are expired and simultaneously introduce new patented (competing) products. Given the specific nature of drug markets, the companies in fact increase the entry cost of the potential generic drug manufacturers and thereby lessen competition for new drugs. The paper determines the optimal date of withdrawing the product and studies comparative static effects of the change of parameters underlying the model.

January 4, 2010 | Permalink | Comments (0) | TrackBack (0)

The design and efficiency of loyalty rewards

Posted by D. Daniel Sokol

Ramon Caminal - Barcelona Graduate School of Economics addresses The design and efficiency of loyalty rewards.

ABSTRACT: The goal of this paper is to reexamine the optimal design and efficiency of loyalty rewards in markets for final consumption goods. While the literature has emphasized the role of loyalty rewards as endogenous switching costs (which distort the efficient allocation of consumers), in this paper I analyze the ability of alternative designs to foster consumer participation and increase total surplus. First, the efficiency of loyalty rewards depend on their specific design. A commitment to the price of repeat purchases can involve substantial efficiency gains by reducing price-cost margins. However, discount policies imply higher future prices and are likely to reduce total surplus. Second, firms may prefer to set up inefficient rewards (discounts), especially in those circumstances where a commitment to the price of repeat purchases triggers Coasian dynamics.

January 4, 2010 | Permalink | Comments (0) | TrackBack (0)

Sequential Spatial Competition in Vertically Related industries with Different Product Varieties

Posted by D. Daniel Sokol

Hamid Beladi (U Texas- San Antonio) Avik Chakrabarti (U Wisconsin-Milwaukee) and Sugata Marjit (Centre for Studies in Social Sciences) describe Sequential Spatial Competition in Vertically Related industries with Different Product Varieties.

ABSTRACT: We demonstrate the sensitivity of the location of downstream firms, engaged in sequential spatial competition, to the vertical structure of an industry where no downstream firm can produce all varieties demanded.

January 4, 2010 | Permalink | Comments (0) | TrackBack (0)

Revising the Merger Guidelines: Second Request Screens and the Agencies' Empirical Approach to Competitive Effects

Posted by D. Daniel Sokol

Gregory Leonard (NERA Economic Consulting) & Lawrence Wu (NERA Economic Consulting) advocate Revising the Merger Guidelines: Second Request Screens and the Agencies' Empirical Approach to Competitive Effects.

ABSTRACT: Two aspects of the Merger Guidelines could benefit from a revision.

First, the Merger Guidelines do not provide guidance on how the Agencies determine whether or not they will issue a Request for Additional Information and Documentary Material (i.e., a “Second Request”). Yet, for many merging parties, guidance on how the Agencies make this initial decision is critical because the receipt of a Second Request implies substantial costs, a lengthier investigation, and delays that could jeopardize the financing of the transaction itself. Thus, a revision that gives greater clarity on the types of evidence and screens that are used in this stage of the investigation will help merging parties and their counsel make more informed decisions as they contemplate the antitrust risk associated with a particular transaction.

Second, the Merger Guidelines offer little guidance regarding the types of empirical evidence and analyses that the Agencies rely upon to determine the likely competitive effects of a proposed transaction. Yet Second Requests typically ask for substantial amounts of data, and, in our experience, the Agencies routinely seek to use these data to implement analyses designed to shed light on the competitive effects of the proposed transaction. Thus, a revision to the Merger Guidelines that provides guidance on the types of empirical analyses that may be undertaken by the Agencies will help the merging parties and the antitrust bar appreciate (a) why the Agencies ask for substantial amounts of data in the Second Request and (b) the variety of empirical questions that the Agencies may ask when evaluating the competitive impact of a proposed transaction.

The nature of the revisions that we are proposing derives from our view that the Merger Guidelines would be more informative and useful if they reflected the actual practices of the Agencies.

January 4, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, January 3, 2010

Coming Soon: Symposium Debate on the Role of FTC Section 5 in Light of Intel

Posted by D. Daniel Sokol

On Thursday and Friday we will have a number of guests blog in a mini-symposium on the Role of FTC Section 5 in Light of Intel.  I will post the final list of guest bloggers on January 6 but so far they include Dan Crane (Michigan), Sean Heather (US Chamber), Keith Hylton (BU), Bob Lande (Baltimore) and Josh Wright (George Mason).

January 3, 2010 | Permalink | Comments (0) | TrackBack (0)