Antitrust & Competition Policy Blog

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

Saturday, July 17, 2010

Impact of China’s Antitrust Law and other Competition Policies on U.S. Companies

Posted by D. Daniel Sokol

House Judiciary Committee this past week on had hearings on the Impact of China’s Antitrust Law and other Competition Policies on U.S. Companies.  See here for the testimony.

July 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Transition and Transformations in Latin American Competition Law and Policy: An Introduction

Posted by D. Daniel Sokol

I have a new piece that introduces the newest CPI Antitrust Chronicle (I am on the editorial board) for the Latin American issue.  My piece is Transition and Transformations in Latin American Competition Law and Policy: An Introduction.

ABSTRACT: Last year, Eleanor Fox and I published Latin American Competition Law and Policy. We attempted to fill a gap by editing a volume that examined how Latin American countries addressed competition law and policy, both at the country level and regionally. What emerged from the book was a picture of a region in which there were many industry changes underway. Latin America is a diverse region, with countries at different levels of antitrust effectiveness based on agency financial resources and human capital constraints. Larger economic, political, and legal institutions in the country also shape the contours of the effectiveness of the various Latin American competition systems. This CPI Antitrust Chronicle issue explores some of the current competition issues challenging several countries in Latin America.

July 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, July 16, 2010

Building Institutions for Development: CADE's Internship Program

Posted by D. Daniel Sokol

The International Advisor at CADE has asked me to post the following:

CADE's Internship Program (


Since mid 1990's the Brazilian Antitrust Authority (CADE) successfully holds a biannual Internship Program. In each term of the program students from all over the country experience the daily life of one of the most important Antitrust Authorities in Latin America. During their month in Brasília, students have both practical and theoretical contact with antitrust law and policy, for they get involved in the major challenges of the country practice in competition law. Students are selected after a competitive selection procedure in which meritocracy plays a leading role. Since its very beginning, PinCADE (CADE's Internship program) is known for your excellence in providing useful training in antitrust law for students willing to learn it and practice afterwards.


The XXX Edition (July 2010) has attained an outstanding accomplishment. After a thoroughly planning and reformulation of the program three goals have been defined: diversity, meritocracy and internationalization. In all of them is this thirtieth edition overwhelmingly successful.


To begin with, for the first time since its creation the program receives students from 14 Brazilian States, it means more than 50% of the entire Federation.


Secondly professional and academic merit became the criteria to choose participants to the internship.


Lastly the program became an international venture, having special importance in Latin America. Since 2009 14 countries already sent representatives to the program and the last edition counts with authorities from eight countries.


International though are not only the participants but also the teachers that shall deliver lectures along the program. Professor George L. Priest from Yale Law School is expected to lecture about economic growth and antitrust law; US FTC Commissioner William E. Kovacic shall lecture on legal reform and antitrust in Latin America. The head of the Portuguese Competition Authority Manuel Sebastião and the Acting Deputy Commissioner of the Competition Bureau Michael Sullivan will also hold a talk with the interns. The program now spreads its importance to Latin America and receives contributions to its improvement from all over the world.


Those are a few reasons why the internship program constitutes one of the most powerful tools of the Brazilian Antitrust Authority to broaden and disseminate the competition culture along the country. It represents also a very important mechanism able to shape Brazilian development toward a fair and long standing development cycle.


In this context CADE's internship program constitutes a an important contribution to the efforts to create adequate institutions to enhance and promote development in Brazil.


Please feel free to contact me should you have any further questions. 


Thank you very much.


Yours sincerely,


José Antonio Ziebarth.


José Antonio Batista de Moura Ziebarth

International Advisor

Conselho Administrativo de Defesa Econômica – CADE

Brazilian Competition Tribunal

SCN Quadra 2 Projeção "C"

CEP 70712-902 - Brasília – DF - Brasil

Tel.: (55) (61) 3221.8404 – Fax: (55) (61) 3221-8589

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

Competition and horizontal integration in maritime freight transport

Posted by D. Daniel Sokol

Pedro Cantos Sanchez (ERI-CES), Rafael Moner-Colonques (ERI-CES), Jose Sempere-Monerris (ERI-CES), and Oscar Alvarez (IEI) address Competition and horizontal integration in maritime freight transport.

ABSTRACT: This paper develops a theoretical model for freight transport characterized by competition between means of transport (the road and maritime sectors), where modes are perceived as differentiated products. Competitive behavior is assumed in the road freight sector, and there are constant returns to scale. In contrast, the freight maritime sector is characterized by oligopolistic behavior, where shipping lines enjoy economies of scale. The market equilibrium where the shipping lines behave as profit maximizers, provides a first approximation to the determinants of market shares, profits, and user welfare. We then characterize the equilibrium when horizontal integration of shipping lines occurs, with and without further economies of scale. An empirical application to the routes Valencia-Antwerp and Valencia-Genoa uncovers that the joint profit of the merged firms and social welfare always increase. However, user surplus onl! y increases when economies of scale are significantly exploited

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

Consumer Shopping Costs as a Cause of Slotting Fees: A Rent-Shifting Mechanism

Posted by D. Daniel Sokol

Stéphane Caprice (Toulouse School of Economics and GREMAQ-INRA) and Vanessa von Schlippenbach (Deutsches Institut für Wirtschaftsforschung (DIW) Berlin and Humboldt-Universität zu Berlin) discuss Consumer Shopping Costs as a Cause of Slotting Fees: A Rent-Shifting Mechanism.

ABSTRACT: Analyzing a sequential bargaining framework with one retailer and two suppliers of substitutable goods, we show that slotting fees may emerge as a result of a rent-shifting mechanism when consumer shopping costs are taken into account. If consumers economize on their shopping costs by bundling their purchases, their buying decision depends rather on the price for the whole shopping basket than on individual product prices. This induces complementarities between the goods offered at a retail outlet. If the complementarity effect resulting from shopping costs dominates the original substitution effect, the wholesale price negotiated with the first supplier is upward distorted in order to shift rent from the second supplier. As long as the first supplier has only little bargaining power, she compensates the retailer for the upward distorted wholesale price by paying a slotting fee. We also show that banning slotting fees ca! uses per- unit price to fall and welfare to increase.

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

Research Agendas: Mine and How I’ve Strayed

Posted by Spencer Weber Waller

I wanted to use this last post to take up Danny’s invitation to talk a little bit about my personal research agenda.  I have been teaching full-time for exactly twenty years now, split evenly between Brooklyn Law School and Loyola University Chicago School of Law.  Because I have served as Associate Dean at both schools, I have long urged my colleagues to develop and stick to a research agenda which sets out what they hope to accomplish over a three to five year period.

The idea is to think beyond your next article and try to articulate some themes that you will be developing in a series of projects for the medium term, without being an automaton who never has time to undertake other types of interesting projects because they are not on the list.  At the same time, the goal is also to avoid being an aimless wanderer exploring one unconnected idea after another without any visible connection.  For most people, a realistic research agenda can include a major theme and normally a minor theme.   I have had wonderful colleagues who have pursued different streams of scholarship on topics such as health care decision making by mature minors and then occasionally switched to shorter pieces on teaching pedagogy; or focused on incorporating happiness (not utility) into legal regimes with occasional forays into class actions and other complex litigation issues.

Only the most prolific can have multiple themes, or no themes at all, and thrive in legal academia.  It is critical to have some kind of a plan that you can articulate to hiring committees, deans, colleagues, and mostly important yourself when you are deciding on what projects to pursue, what symposia to attend or speak at, and most importantly when to say no (or at least not now) to interesting projects that are likely to be lengthy and unproductive detours.   So to practice what I preach let me give you an outline of my research agenda over the years and how it has evolved. 

When I entered academia, I was interested in two main themes that I was lucky enough to be able to explore in both my teaching and writing.  The first concerned the relationship between competition law and international trade law.  The second concerned the international application of US antitrust law to international commerce and the constraints imposed by jurisdictional limitations, comity, sovereign immunity, the act of state doctrine, the foreign sovereign compulsion doctrine, and related concepts. 

Looking back at my cv, I think I stuck reasonably well to my plan.  Most, but not all of my early articles, stuck to either or both of these themes.   Recognizing the specialized and international nature of most of this work, I am not surprised that these articles more typically appeared in specialty international law journal.   Outside events also affected the importance of these issues and my interest in continuing to pursue them in extended law review format.   Once the Supreme Court in Hartford Fire largely settled (rightly or wrongly) the debate over the proper role of comity in the extraterritorial application of the Sherman Act, I took one final swing at this topic (The Twilight of Comity, 38 Colum. J. Trans. L. 563 (2000), available at and moved on.  I continue to follow these topics in updating a treatise but have addressed other topics moving forward.

Somewhere in the middle of these early years of teaching, I also became interested in the history of antitrust law and certain key figures of that history.  First as a sidelight, and then as a more significant focus, I explored the antitrust thought and significance of such figures as Oliver Wendell Holmes, Robert Jackson, Edward Levy, Walton Hamilton, Milton Handler, Thurman Arnold, and eventually John Paul Stevens.  These inquiries exposed me to the joys and frustrations of archival research and the other tools of the trade of legal history.  Some of these inquiries proved to be frolics and detours but others turned into full articles, symposium pieces, or review essays. 

In the course of this research, I discovered what a truly unique person Thurman Arnold was besides his importance to US competition law.  I began to search for a biography to read about him and became immensely frustrated when I realized that none existed.  It was only sometime later that I took advantage of a research leave to do the archival research and interviews to produce that first biography of this complex and fascinating man who contributed so much to 20th century law and legal thought in addition to being a giant of the antitrust field as well. (Thurman Arnold: A Biography

Along the way to working on the Thurman Arnold biography, I stumbled on the work of the business strategist Michael Porter, who was trained as an industrial organization economist.  His conception of competition opened up for me my next significant stream of scholarship.  I became increasingly interested how business scholars wrote about competition and how business schools taught business decision makers about this critical subject.  Over time, I focused on how business theory taught how to achieve durable market power through different techniques and strategies.  There appeared to be a serious disconnect with much of antitrust economics which often denied that such durable power is possible and more generally pays no attention to the business theory world.  In different articles, I have explored (and am still exploring) how the business world thinks, talks, and acts regarding strategic management, marketing, corporate finance, corporate governance, and brand management and how those concepts can be applied in the antitrust realm.

I find it odd that most of antitrust discourse ignores the discourse of the very business actors whose behavior is the subject of antitrust law in the first place.  My goal is to take the best of this business discourse and bring it into the antitrust debate as a supplement to the economic analysis we use on a daily basis.  The most recent example is Brands, Competition and the Law which I co-wrote with Deven Desai, who is now the academic liaison at Google.  It will be published sometime in the fall in the BYU Law Review and is available in draft form at   Long-term, maybe this is a book or maybe just a couple more articles until I have exhausted the topic and my initial excitement on how business theory can be an important supplement to the way we currently think about antitrust.

Finally, a word about the essential facilities doctrine.  I always thought MCI got it right, Trinko got it wrong, and the rest of the world gets it more or less correct.  So after Trinko, I pursued a path which eventually turned into four articles (two with co-authors) where I critiqued Trinko; developed a theoretical framework for a well reasoned and cabined essential facilities doctrine; addressed some of the original critiques of the doctrine going back to a classic article by Phil Areeda; and surveyed how most of the major antitrust jurisdictions outside the U.S. handle similar issues.   I never particularly intended it to play out that way.  One thing just led to another.  Now I’ve had my say, people will agree or disagree, and I don’t plan to return to that subject any time soon.

On too many occasions, I have failed to follow my own advice and taken on projects that had nothing whatsoever with the themes I have described above.  Besides my abiding love for all things baseball, I have at least tried to stick to at least of whatever were my current themes at any given time.  When I have strayed from this path, and said yes to fun but unconnected projects, I have done my best to at least make them something short, like a symposium piece, an unpublished conference talk, or a book review.  At a minimum, I have tried to make such unrelated projects an “extra” and not an “instead of.”  I will leave it to others to determine how well I have succeeded.

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

What is a competitive market? The United Kingdom experience and lessons for Hong Kong

Posted by D. Daniel Sokol

Hong Kong University - Norton Rose Lecture Series
Second Annual Competition Law Lecture

What is a competitive market?
The United Kingdom experience
and lessons for Hong Kong

By Peter Freeman CBE, QC, Chairman
UK Competition Commission
Hong Kong University
Date: Thursday, 9 September 2010
Free registration
To register and for more details, please access

Hong Kong University - Norton Rose Lecture Series

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

When an inefficient firm makes higher profit than its efficient rival

Posted by D. Daniel Sokol

Debapriya Sen (Ryerson University) and Giorgos Stamatopoulos (University of Crete) explain When an inefficient firm makes higher profit than its efficient rival.

ABSTRACT: This paper considers a Cournot duopoly game with endogenous organization structures. There are two firms A and B who compete in the retail market, where A is more efficient than B. Prior to competition in the retail stage, firms simultaneously choose their organization structures which can be either 'centralized' (one central unit chooses quantity to maximize firm's profit) or 'decentralized' (the retail unit chooses quantity to maximize firm's revenue while the production unit supplies the required quantity). Identifying the (unique) Nash Equilibrium for every retail-stage subgame, we show that the reduced form game of organization choices is a potential game. The main result is that with endogenous organization structures, situations could arise where the less efficient firm B obtains a higher profit than its more efficient rival A.

July 16, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 15, 2010

Patent Pools as a Solution to Efficient Licensing of Complementary Patents? Some Experimental Evidence

Posted by D. Daniel Sokol

Rudy Santore (University of Tennessee), Michael McKee (Appalachian State University) and David Bjornstad (Oak Ridge National Laboratory) discuss Patent Pools as a Solution to Efficient Licensing of Complementary Patents? Some Experimental Evidence.

ABSTRACT: Production requiring licensing groups of complementary patents implements a coordination game among patent holders, who can price patents by choosing among combinations of fixed and royalty fees. Summed across patents, these fees become the total producer cost of the package of patents. Royalties, because they function as excise taxes, add to marginal costs, resulting in higher prices and reduced quantities of the downstream product and lower payoffs to the patent holders. Using fixed fees eliminates this inefficiency but yields a more complex coordination game in which there are multiple equilibria, which are very fragile in that small mistakes can lead the downstream firm to not license the technology, resulting in inefficient outcomes. We report on a laboratory market investigation of the efficiency effects of coordinated pricing of patents in a patent pool. We find that pool‐like pricing agreements can yield fewer coordination failures in the pricing of complementary patents.

July 15, 2010 | Permalink | Comments (0) | TrackBack (0)

Product Line Pricing in a Vertically Differentiated Oligopoly

Posted by D. Daniel Sokol

George Deltas (Department of Economics, University of Illinois, U.-C., United States), Thanasis Stengos (Department of Economics, University of Guelph, Canada), and Eleftherios Zacharias (Department of Economics, Athens School of Economics, Greece) discuss Product Line Pricing in a Vertically Differentiated Oligopoly.

ABSTRACT: This paper empirically examines the joint pricing decision of products in a firm's product line. When products are distinguished by a vertical characteristic, those products with higher values of that characteristic will command higher prices. We investigate whether, holding the value of the characteristic constant, there is a price premium for products on the industry and/or the firm frontier, i.e., for the products with the highest value of the characteristic in the market or in a firm's product line. The existence of price premia for lower ranked products is also investigated. Finally, the paper investigates whether firms set prices to avoid cannibalizing the other products in their portfolio, whether competition with rival firms is stronger for products that are closer to the frontier compared to other products, and whether a product's price declines with the time it is ownered by a firm. Using personal computer pric! e data, we show that prices decline with the distance from the industry and firm frontiers. We find evidence that consumer tastes for brands is stronger for the consumers of frontier products (and thus competition between firms weaker in the top end of the market). Finally, there is evidence that a product's price is higher if a firm offers products with the immediately faster and immediately slower computer chip (holding the total number of a firm's offerings constant), possibly as an attempt way to reduce cannibalization.

July 15, 2010 | Permalink | Comments (0) | TrackBack (0)

Can We Protect Competition Without Protecting Consumers?

Posted by D. Daniel Sokol

Oles Andriychuk (University of East Anglia) asks Can We Protect Competition Without Protecting Consumers?

ABSTRACT: This paper suggests that an interpretation of competition solely as a means to increase consumer welfare eliminates substantial characteristics from competition as a process, depriving competition from its original meaning. It is misleading to define competition by evaluating its external role on the economy. This role is important only from the perspective of performance. From the ontological view however it is irrelevant. Some forms of competition are good or beneficial others are considered as harmful or undesirable, but in both cases we talk about different features of the same phenomenon. The idea that ‘competition has to bring positive outcomes for economy, otherwise it is not competition’ is logically incorrect. It is impossible to qualify the essence of object only by exploring its external effects. The paper concludes that competition itself deserves its protection even in circumstances when it does not lead to efficiency gains. In this respect competition can be seen as a ‘luxury product’ of market-oriented societies, which is not indispensable for achieving such values as industrial growth, market integration, social coherency, consumer welfare or innovations.

July 15, 2010 | Permalink | Comments (0) | TrackBack (0)

Advanced Agency & Distribution 2010

Posted by D. Daniel Sokol

With the complexity of agency and distribution agreements and relationships increasingly being manifested in significant legal and regulatory developments, join us this October for IBC Legal’s cutting-edge one day event Advanced Agency and Distribution and enhance your knowledge of distribution law.

Designed for lawyers and businessmen involved in agency, distributorship, licensing and franchising, this conference will review the legal and commercial differences between agents and distributors as well as their rights and obligations.

Joining your expert chairman Simon Holmes, Head of EU & Competition, SJ Berwin LLP will be a wealth of speakers, including:

  • Jackie Holland, Director of Competition Policy, OFT, London
  • Regula Walter, Head of Legal, E-Commerce & Antitrust, Richemont International SA, Geneva
  • Antonio Capobianco, Senior Competition Law Expert, Competition Division, OECD, Paris

For more on all the speakers in 2010, simply view the Advanced Agency & Distribution line-up.

Managing today’s commercial and competition law challenges on and offline is as challenging as ever and this year’s event not only aims to bring you up to speed with the latest developments but assesses real-life problems in the afternoon case study to enhance your skills and strategies. Key areas of focus include:

  • Definitions and interpretations
  • Agency, distribution and licensing agreements  
  • Doing business online
  • Category management 
  • Information exchange
  • Competition law considerations and risks

Want to know more? For all topics and information on the event and the interactive afternoon session, please view the Advanced Agency & Distribution 2010 brochure today.

Remember to book by the 20th August in order to save £200! Book online today.

Plus attend this event to receive free membership* for 2010 to the Competition Law Association (CLA)!

July 15, 2010 | Permalink | Comments (0) | TrackBack (0)

Bundling and Compatibility: Selling the Whole Package May Be Pro-Competitive

Posted by D. Daniel Sokol

Matteo Alvisi, University of Bologna - Department of Economics and Emanuela Carbonara, University of Bologna - Department of Economics explain Bundling and Compatibility: Selling the Whole Package May Be Pro-Competitive.

ABSTRACT: In this paper we study price competition, equilibrium market configurations and entry decisions when firms compete in vertically-differentiated markets producing complementary goods. We show that allowing firms to sell complementary goods may be welfare-enhancing and pro-competitive. In fact, such strategy favors the entry of new firms producing lower-quality components. Moreover, this strategy increases consumer surplus, even when firms sell the two complements as a bundle. Interestingly, notwithstanding the increase in competition, it is always optimal for firms to enter a complementary good market. By discouraging such practices, antitrust authorities may harm both consumers and low-quality firms, at the same time undermining market stability.

July 15, 2010 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 14, 2010

WSJ Op-Ed Against the Hong Kong Competition Law

Posted by D. Daniel Sokol

I have not read the Hong Kong draft law and so I cannot comment as to the specifics on the law.  However, this op-ed that appeared in the Wall Street Journal titled Competition Law and (Dis)order seems to lack a basic understanding of competition law and economics and takes broad swipes at antitrust more generally.  The reason why trade open economies have competition laws is because the non-tradable sectors may have lots of cartels and lots of abuse of dominance problems. Even if you are a libertarian (which the op-ed author seems to be), you should recognize that a naked cartel hurts consumers and that the possibility of false positives for such cartels is very low.

From what I can tell, the relatively new Singapore Competition Commission has done exceptionally well in its short existence. You do not see businesses fleeing Singapore because of the competition law.

July 14, 2010 | Permalink | Comments (5) | TrackBack (0)

Going Beyond the Conventional Wisdom on Whether Merger-Related Cost Savings Will Benefit Customers

Posted by D. Daniel Sokol

Michael Baye (IU Bloomington - Kelley School of Business) and Graeme Hunter (NERA) discuss Going Beyond the Conventional Wisdom on Whether Merger-Related Cost Savings Will Benefit Customers.

ABSTRACT: The motivation for many proposed mergers and acquisitions is the potential to reduce operating costs or to improve product quality, customer service, or the rate of innovation. Although the prospect of efficiencies may explain why the merging parties want to merge, what determines whether consumers are likely to benefit as well? This paper examines the conventional wisdom that reductions in marginal costs will be passed through to consumers in the form of lower prices. They explain how and why a given reduction in marginal cost may or may not lead to a drop in price. The market factors that may determine the outcome include the nature of consumer demand and the dynamics of competition in the market served by the merged firm.

Download Antitrust_Insights_Spring_2010[1]

July 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Market concentration measures and investment decisions in Mexican manufacturing firms

Posted by D. Daniel Sokol

Celina Lopez-Mateo and Antonio Ruiz-Porras (both University of Guadalajara) have posted Market concentration measures and investment decisions in Mexican manufacturing firms.

ABSTRACT: We study how alternative measures of market concentration may explain investment decisions of Mexican manufacturing firms. The measures include the Herfindahl-Hirschman Index and the Dominance one. The first one is the traditional measure of market structure concentration. The Dominance Index is a competition measure used by Mexican regulators. The econometric assessments suggest that investment decisions of Mexican firms can be better explained by the Dominance Index measure than by the Herfindahl-Hirschman one. Thus our results suggest that the Mexican Dominance Index might be useful as a measure of market structure and competition. Such conclusion is based on several econometric assessments. In all cases we use certain characteristics of the firms (size, cash flows, investment opportunities and capital intensity) as control variables.

July 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Competition Issues in the Seed Industry and the Role of Intellectual Property

Posted by D. Daniel Sokol

GianCarlo Moschini (Iowa - Econ) has an interesting new piece on Competition Issues in the Seed Industry and the Role of Intellectual Property.

ABSTRACT: Research and Development (R&D) and innovation are crucial features of the seed industry. To support large R&D investments by the private sector, strong intellectual property rights, such as patents, are necessary. The exclusivity granted by patents naturally creates market power positions and raises difficult and unresolved competition issues in an antitrust context. 

July 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Innovation, Competition And Consumer Welfare In Intellectual Property Law

Posted by D. Daniel Sokol

Gustavo Ghidini, Professor of Intellectual Property and Competition Law, University of Milan and Director, Observatory on Intellectual Property, Competition and Communications Law, LUISS Guido Carli University, Rome, Italy has just published Innovation, Competition And Consumer Welfare In Intellectual Property Law.

BOOK ABSTRACT: This authoritative book provides a comprehensive critical overview of the basic IP paradigms, such as patents, trademarks and copyrights. Their intersection with competition law and their impacts on the exercise of social welfare are analysed from an evolutionary perspective.

The analyses and proposals presented encompass the features and rationales of a legal field in constant evolution, and relate them to increasingly rapid technological, economic, social and geo-political developments. Gustavo Ghidini highlights the emerging trends that challenge the traditional ‘all-exclusionary’ vision of IP law and its application. The author expertly combines holistic, evolutionary and constitutionally oriented approaches, with the search for a rebalancing of the IP rights holders’ positions with citizens’ and users’ rights.

July 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Health insurance competition: the effect of group contracts

Posted by D. Daniel Sokol

Jan Boone (Department of Economics, CentER, Tilec, Tilburg University), Carline Droge (CPB Netherlands Bureau for Economic Policy Analysis), Ilaria Mosca (Sint Fransiscus Gasthuis), and Rudy Douven (Dutch Healthcare Authority and TILEC) examine Health insurance competition: the effect of group contracts.

ABSTRACT: In countries like the US and the Netherlands health insurance is provided by private firms. These private firms can offer both individual and group contracts. The strategic and welfare implications of such group contracts are not well understood. Using a Dutch data set of about 700 group health insurance contracts over the period 2007-2008, we estimate a model to determine which factors explain the price of group contracts. We find that groups that are located close to an insurers’ home turf pay a higher premium than other groups. This finding is not consistent with the bargaining argument in the literature as it implies that concentrated groups close to an insurer’s home turf should get (if any) a larger discount than other groups. A simple Hotelling model, however, does explain our empirical results.

July 14, 2010 | Permalink | Comments (2) | TrackBack (0)

Tuesday, July 13, 2010

Strategic Behavious of Firms in a Duopoly and the Impact of Extending the Patenting Period

Posted by D. Daniel Sokol

Jolian McHardy (Department of Economics, The University of Sheffield) have a new paper on Strategic Behavious of Firms in a Duopoly and the Impact of Extending the Patenting Period.

ABSTRACT: This paper deals with strategic behaviour of firms in a duopoly, subsequent to the claim by one firm that it has reduced the unit cost of production. A variety of possible strategic equilibria are discussed in the context of a duopoly game between a multinational and a local firm. In the context of an extended uniform period of patenting, as finally agreed in the Uruguay round (1994), firms have increased incentive to take patents. In the presence of cost differences, the act of taking process-patents has implications for the equilibrium output strategies of the duopoly firms and sometimes may have a negative overall welfare effect for the local producer and consumers.

July 13, 2010 | Permalink | Comments (0) | TrackBack (0)