Antitrust & Competition Policy Blog

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

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Monday, July 25, 2011

Fight Cartels or Control Mergers? On the Optimal Allocation of Enforcement Efforts within Competition Policy

Posted by D. Daniel Sokol

Andreea Cosnita-Langlais and Jean-Philippe Tropeano (both University of Paris) ask Fight Cartels or Control Mergers? On the Optimal Allocation of Enforcement Efforts within Competition Policy.

ABSTRACT: This paper deals with the optimal enforcement of the competition law between the merger and anti-cartel policies. We examine the interaction of these two branches of the competition policy given the budget constraint of the competition agency and taking into account the ensuing incentives for firms’ behavior in terms of choice between cartels and mergers. We are thus able to conclude on the optimal competition policy mix. We show for instance that to the extent that a tougher anti-cartel action triggers more mergers taking place, the public agency will optimally invest only in control fighting for a tight budget, and then in both instruments as soon as the budget is no longer tight. However, if the merger’s coordinated effect is taken into account, then when resources are scarce the agency may optimally have to spend first on controlling mergers before incurring the cost of fighting cartels.

July 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Entry deterrrence via renegotiation-proof non-exclusive contracts

Posted by D. Daniel Sokol

Aggey Semenov (Department of Economics, University of Ottawa, Ottawa, ON) and Julian Wright (Department of Economics, National University of Singapour) explore Entry deterrrence via renegotiation-proof non-exclusive contracts.

ABSTRACT: We establish the entry-deterring role of vertical contracts in a setting that does not rely on asymmetric information, the exclusivity of the incumbent’s contracts, limits on distribution channels, or restrictions on the ability to renegotiate contracts in case of entry. The optimal contract we describe is a three-part quantity discounting contract that involves the payment of an allowance to the downstream firm and a marginal wholesale price below the incumbent’s marginal cost for sufficiently large quantities.

July 25, 2011 | Permalink | Comments (0) | TrackBack (0)