Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, April 19, 2010

The Future of Behavioral Economics in Antitrust Jurisprudence

Posted by D. Daniel Sokol

Douglas H. Ginsburg (U.S. Court of Appeals for the DC Circuit) & Derek W. Moore (Cadwalader) offer insights into The Future of Behavioral Economics in Antitrust Jurisprudence.

ABSTRACT: Neoclassical economics or “price theory” has had a profound effect upon antitrust analysis, first as practiced in academia and then as reflected in the jurisprudence of the Supreme Court of the United States. More recently, behavioral economics has had a large and growing influence upon legal scholarship generally. Still, behavioral economics has not yet affected judicial decisions in the United States in any substantive area of law. The question we address is whether that is likely to change in the foreseeable future, i.e., whether the courts’ present embrace of price theory in antitrust cases portends the courts’ imminent acceptance of behavioral economics in either antitrust or consumer protection cases.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

On price taking behavior in a nonrenewable resource cartel-fringe game

Posted by D. Daniel Sokol

Hassan Benchekroun (McGill - Econ) and Cees Withagen (VU University Amsterdam) provide thoughts On price taking behavior in a nonrenewable resource cartel-fringe game.

ABSTRACT: We consider a nonrenewable resource game with one cartel and a set of fringe members. We show that (i) the outcomes of the closed-loop and the open-loop nonrenewable resource game with the fringe members as price takers (the cartel-fringe game a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop Nash game does not coincide with the equilibrium outcome of the closed-loop cartel-fringe game. Thus, the outcome of the cartel-fringe open-loop equilibrium can be supported as an outcome of a subgame perfect equilibrium. However the interpretation of the cartel-fringe model, where from the outset the fringe is assumed to be price taker, as a limit case of an asymmetric oligopoly with the agents playing Nash-Cournot, does not extend to the case where firms can use closed-loop strategies.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)

Posted by D. Daniel Sokol

David Harbord and Market Analysis Ltd and Steffen Hoernig, Universidade Nova de Lisboa explain Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger).

ABSTRACT: This paper presents results from a calibrated welfare model of the UK mobile telephony market which includes many mobile networks; calls to and from the fixed network; networkbased price discrimination; and call externalities. The analysis focuses on the short-run effects of adopting lower mobile termination rates (MTRs) on total welfare, consumer surplus and profits. Our simulations show that reducing MTRs broadly in line with the recent European Commission Recommendation to either “long-run incremental cost”; reciprocal termination charges with fixed networks; or “bill-and-keep” (i.e. zero termination rates), increases social welfare, consumer surplus and networks’ profits. Depending on the strength of call externalities, social welfare may increase by as much as £360 million to £2.5 billion per year. The analysis thus lends support to a move away from fully-allocated cost pricing and towards much lower MTR! s, with bill-and-keep frequently leading to the highest increase in welfare when call externalities matter. We also apply the model to estimate the welfare effects of the recently-approved merger between Orange and T-Mobile under two different scenarios concerning MTRs.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

How Does Competition Impact Bank Risk-Taking?

Posted by D. Daniel Sokol

Gabriel Jiménez (Banco de España), Jose A. Lopez (Federal Reserve Bank Of San Francisco), and Jesús Saurina (Banco de España) ask How Does Competition Impact Bank Risk-Taking?

ABSTRACT: A common assumption in the academic literature is that franchise value plays a key role in limiting bank risk-taking. As market power is the primary source of franchise value, reduced competition in banking markets has been seen as promoting banking stability. We test this hypothesis using data for the Spanish banking system. We find that standard measures of market concentration do not affect bank risk-taking. However, we find a negative relationship between market power measured using Lerner indexes based on bank-specific interest rates and bank risk. Our results support the franchise value paradigm.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Targeting in Advertising Markets: Implications for Offline vs. Online Media

Posted by D. Daniel Sokol

Dirk Bergemann (Cowles Foundation, Yale University) and Alessandro Bonatti (MIT Sloan School of Management) provide theire thoughts on Targeting in Advertising Markets: Implications for Offline vs. Online Media.

ABSTRACT: We develop a model with many heterogeneous advertisers (products) and advertising markets (media). Each advertiser has a different consumer segment for its product, and each medium has a different ability to target advertisement messages. We characterize the competitive equilibrium in the media markets and investigate the role of targeting for the price and allocation of advertisements across media markets. An increase in the targeting ability leads to an increase in the total number of purchases (matches), and hence in the social value of advertisements. Yet, an improved targeting ability also increases the concentration of advertising firms in each market. Surprisingly, we find that the equilibrium price for advertisements is decreasing in the targeting ability over a large range of parameter values. We trace out the implications of targeting for competing media markets. We distinguish offline and online media by their! targeting ability: low versus high. We show that competition by an online medium lowers the revenue of the offline medium more than competition by another offline medium of the same size.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 18, 2010

Antitrust between EU law and National law

Posted by D. Daniel Sokol

Antitrust between EU law and National law

Uae Lidc Aigi Aeje Mennet

The Treviso conference on “Antitrust between EU law and National law”, now in its ninth edition, takes place every two years in Treviso since 1992; it is hosted by Cassamarca Foundation and is sponsored by the European Lawyers' Union (U.A.E), the Associazione Italiana per la Tutela della Concorrenza - member of the Ligue Internationale du Droit de la Concurrence (LIDC), the Associazione Italian dei Giuristi d'Impresa (AIGI), the European Company Lawyers Association (AEJE-ECLA) and by Jean Monnet Centre of Excellence, Università degli Studi di Milano.

The actuality of the topics covered and the presence of high-qualified speakers made the Treviso Conference, since its first edition, one of the most significant moments of encounter and debate among the leading representatives of national and international antitrust law. Indeed, the Conference includes, among its participants, representatives of the International Antitrust Authorities, as well as outstanding figures from academics and the professionals involved in the enforcement of antitrust law.


April 18, 2010 | Permalink | Comments (0) | TrackBack (0)