Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, April 5, 2011

CC/OFT publish guidance on merger surveys

Posted by D. Daniel Sokol

The Competition Commission (CC) and the Office of Fair Trading (OFT) today published guidance setting out good practice principles for the design and presentation of consumer survey research in merger inquiries. See here.

 

April 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Trade Protection and Market Power: Evidence from US Antidumping and Countervailing duties

Posted by D. Daniel Sokol

Laura ROVEGNO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) provides an analysis of Trade Protection and Market Power: Evidence from US Antidumping and Countervailing duties.

ABSTRACT: This paper uses a long panel of US 4-digit industries to analyse the impact of US Antidumping (AD) and Countervailing duties (CVD) on domestic producers' price-cost margins (PCM). In the analysis I account for selection bias in the imposition of AD/CVD as well as the intensity of the protection granted. I find evidence of a positive effect of AD/CVD on PCM. However, the point estimates are small suggesting that whilst the effects of these policies on the market of the products directly affected may be important, their sector level effects are modest.

April 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, April 4, 2011

Market Power in Water Markets

Posted by D. Daniel Sokol

Erik Ansink (IVM, VU University Amsterdam, and Wageningen University) and Harold Houba (VU University Amsterdam) explore Market Power in Water Markets.

ABSTRACT: Water markets with market power are analysed as multi-market Cournot competition in which the river structure constrains access to local markets and limited resources impose capacity constraints. Conditions for uniqueness are identified. Lerner indices are larger under binding resource constraints. The number of cases explodes in the number of local markets. Under quadratic benefit functions and symmetric constant marginal extraction costs, closed-form solutions for selected cases are derived, and numerical implementation through a single optimization program is available. Upstream locations face less competition than downstream. Observed price patterns in the Goulburn-Murray Irrigation District are consistent with the theoretical results.

April 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Pivotal Suppliers and Market Power in Experimental Supply Function Competition

Posted by D. Daniel Sokol

Jordi Brandts (Universitat Autonoma de Barcelona), Stanley S. Reynolds (University of Arizona), and Arthur Schram (University of Amsterdam) explore Pivotal Suppliers and Market Power in Experimental Supply Function Competition.

ABSTRACT: In the process of regulatory reform in the electric power industry, the mitigation of market power is one of the basic problems regulators have to deal with. We use experimental data to study the sources of market power with supply function competition, akin to the competition in wholesale electricity markets. An acute form of market power may arise if a supplier is pivotal; that is, if the supplier's capacity is required in order to meet demand. To be able to isolate the impact of demand and capacity conditions on market power, our treatments vary the distribution of demand levels as well as the amount and symmetry of the allocation of production capacity between different suppliers. We relate our results to a descriptive power index and to the predictions of two alternative models: a supply function equilibrium (SFE) model and a multi-unit auction (MUA) model. We find that pivotal suppliers do indeed exercise their mar! ket power in the experiments. We also find that observed behavior is consistent with the range of equilibria of the unrestricted SFE model and inconsistent with the unique equilibria of two refinements of the SFE model and of the MUA model.

April 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Two-Sided Competition and Differentiation (with an Application to Media)

Posted by D. Daniel Sokol

Guillaume Roger (School of Economics, The University of New South Wales) addresses Two-Sided Competition and Differentiation (with an Application to Media).

ABSTRACT: We model a duopoly in which two-sided platforms compete on both sides of a two-sided market. Platforms (or intermediaries) select the quality they offer consumers, and the prices they charge to consumers and firms. In this model, non-trivial competition on both sides induces non-quasiconcave payoffs in one subgame. All equilibria are characterized. Under well-defined conditions, the unique equilibrium in pure strategies can be computed. Prices entail a discount on one side, a premium on the other one and the quality offered to consumers is distorted downward. When the pure-strategy equilibrium fails to exist, a mixed-strategy equilibrium is shown to always exist and the distributions are characterized. In this case, the market may be preempted ex post. The model may find applications in the media, internet trading platforms, the software industry or even the health care industry (HMO/PPO).

April 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Free Entry, Market Diffusion, and Social Inefficiency with Endogenously Growing Demand

Posted by D. Daniel Sokol

Hiroshi Kitamura (Faculty of Economics, Sapporo Gakuin University), Akira Miyaoka (Graduate School of Economics, Osaka University), and Misato Sato (Graduate School of Economics, George Washington University) explain Free Entry, Market Diffusion, and Social Inefficiency with Endogenously Growing Demand.

ABSTRACT: This paper analyzes market diffusion in the presence of oligopolistic interaction among firms. Market demand is positively related to past market size because of consumer learning, networks, and bandwagon effects. Firms enter the market freely in each period with fixed costs and compete in quantities. We demonstrate that free entry leads to a socially inefficient number of firms over time, and that the nature of the inefficiency changes as the market grows: the number of firms is initially insufficient but eventually excessive. This is in contrast with previous findings in the theoretical literature.

April 4, 2011 | Permalink | Comments (0) | TrackBack (0)