Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, June 9, 2012

Albania's Experience in Competition Law

Posted by D. Daniel Sokol

Ermal Nazifi (Albanian Competition Authority) explores Albania's Experience in Competition Law.

ABSTRACT: Albania has been one of the most isolated and underdeveloped European countries for centuries, despite its great potential because of favorable geographic position and its relative richness in natural resources. After the Second World War, Albania suffered from one of the harshest communist regimes in the world, and a total isolation in every aspect. When the regime collapsed in 1990, the GDP per Capita of Albania was calculated at $450, placing Albania between Lesotho and Sri Lanka as the 32nd lowest developed country in the world.

Although the communist regime invested a lot in the industrial development of the country, production was constrained by the mismanagement and inefficiency that characterize communist systems. One of the main reasons for this inefficiency was the total absence of competition as the economic system was strictly centrally planned.

After the start of the transition of the Albanian economy from a planned to an open market economy, the need for introduction of rules that assured free and effective competition was imminent.

The first law that dealt with the protection of competition was "On Competition," no. 8044, dated December 7, 1995. The approval of this law is the cornerstone of the institutionalization of competition law in Albania. This law included provisions on monopolies, dominant position, and unfair competition. Also, this law regulated the rights and the duties of all actors of the market: consumers and clients looking for goods or services, as well as undertakings that offer these goods or services. But the implementation of this law in practice was difficult despite the endeavors of the competent institutions.

June 9, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, June 8, 2012

Politically Incorrect—Social Protest, Competition Advocacy, and Political Economy in Israel

Posted by D. Daniel Sokol

Shlomi Parizat (Israeli Antitrust Authority) discusses Politically Incorrect—Social Protest, Competition Advocacy, and Political Economy in Israel.

ABSTRACT: In the summer of 2011, "Social Justice" became a rallying point for over 400,000 people in one of the largest protests seen in Israel. The movement began with a small group of friends in Tel Aviv who found housing prices way too high and were outraged by the government's (un)social agenda. The movement spread quickly, and soon there were protests in every major city. Activists took to the streets in a non-violent and non-political demonstration of frustration, setting up tent cities in all the major streets and parks. Their demands were many and varied. Some focused on costs-of-living in Israel; others on fair employment conditions and on social inequality. Because the movement was truly spontaneous, the actual demands of the protesters, other than the somewhat vague notion of "social justice," were unclear and amorphous.

In response to this massive protest movement, the government commissioned the Committee for Economic and Social Change, otherwise known as the "Trajtenberg Committee," in order to uncover the major concerns behind the protests and suggest ways to address them.

This paper will describe the work and findings of the "Competition and Cost-of-living" team of the Committee. The first section delineates changes in the cost-of-living in Israel over the last decade. In the second section, the probable direct causes of those changes are discussed. Lastly, the paper suggests a clear link between those findings and a political-regulatory failure; in particular, that regulatory systems in Israel had mostly failed to protect public welfare in the face of special interest groups and big businesses. The main conclusion of the sub-committee is that intense competition advocacy, together with stronger consumer organizations, are the best tools to "level the playing field" and serve the public interest.

June 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Google's Monopoly and Internet Freedom

Posted by D. Daniel Sokol

Over in the op-ed section of today's Wall Street Journal is an opinion piece by Jeffrey Katz called Google's Monopoly and Internet Freedom.

June 8, 2012 | Permalink | Comments (0) | TrackBack (0)

The Goals Of Competition Law

Posted by D. Daniel Sokol

Daniel Zimmer, Professor of Law, University of Bonn has edited The Goals Of Competition Law.

BOOK ABSTRACT: What are the normative foundations of competition law? That is the question at the heart of this book. Leading scholars consider whether this branch of law serves just one or more than one goal, and, if it serves to protect unfettered competition as such, how this goal relates to other objectives such as the promotion of economic welfare.

Table of Contents:

PART I: NORMATIVE FOUNDATIONS OF COMPETITION LAW

1. On the Choice of Welfare Standards in Competition Law Louis Kaplow

2. What is Competition? Maurice E. Stucke

3. Characteristic Aspects of Competition and their Consequences for the Objectives of Competition Law – Comment on Stucke Andreas Fuchs

4. The Multiple Personalities of EU Competition Law: Time for a Comprehensive Debate on its Objectives Laura Parret

5. The Goals of European Competition Law: Some Distortions in the Literature – Comment on Parret David J. Gerber

6. Thinking Inside the Box: Why Competition as a Process is a Sui Generis Right – a Methodological Observation Oles Andriychuk

7. Legal Interpretation and Practice versus Legal Theory: A Reconciliation of Competition Goals – Comment on Andriychuk Anca Daniela Chirita

8. On the Normative Foundations of Competition Law – Efficiency, Political Freedom and the Freedom to Compete Frank Maier-Rigaud

9. Efficiency, Political Freedom and the Freedom to Compete – Comment on Maier-Rigaud Heike Schweitzer

10. Economic Content of Competition Law: The Point of Regulating Preferences Adrian Kunzler

11. On the Difference of Methodology in Jurisprudence and Economics – Comment on Künzler Iwakazu Takahashi

12. Do Words Matter? A Discussion on Words used to Designate Values Associated with Competition Law Paul Nihoul

13. On Words and on Shifting their Meaning – Comment on Nihoul Josef Bejcek

14. Antitrust Pluralism and Justice Abayomi Al-Ameen

15. Antitrust Pluralism and Justice – Comment on Al-Ameen Michal S. Gal and Eran Fish

PART II: SELECTED ISSUES RELATED TO THE GOALS OF COMPETITION LAW

16. The Single Market Imperative and Consumer Welfare: Irreconcilable Goals? Exploring the Tensions Amongst the Objectives of European Competition Law through the Lens of Parallel Trade in Pharmaceuticals Matteo Negrinotti

17. Goals of Union Competition Law on Regulated Markets: Pharmaceutical Industry and Parallel Trade – Comment on Negrinotti Lubos Tichy

18. Excessive Pricing and the Goals of Competition Law Thomas Ackermann

19. Excessive Pricing and the Goals of Competition Law: An Enforcement Perspective – Comment on Ackermann Jorg Philipp Terhechte

20. China’s Anti-Monopoly Law: Agent of Competition Enhancement or Engine of Industrial Policy? Xiaoye Wang and Jessica Su

21. China’s Anti-Monopoly Law: Agent of Competition Enhancement or Engine of Industrial Policy? – Comment on Wang and Su Deborah Healey

22. Reflections on the Concepts of ‘Economic Freedom’, ‘Free Competition’ and ‘Efficiency’ from the Perspective of Developing Countries Mor Bakhoum

23. A Social Approach to the Goals of Competition Law in Developing Countries – Comment on Bakhoum Karounga Diawara

24. Competition Law Goals in Agricultural Markets: A Latin American Perspective Juan David Gutiérrez Rodríguez

25. Agricultural Markets and Competition Policy in Latin America: Conflicts of Goals, Rules and Enforcement Policies – Comment on Gutiérrez Rodríguez Carlos Pablo Márquez

26. The Basic Goal of Competition Law: To Protect the Opposite Side of the Market Daniel Zimmer

June 8, 2012 | Permalink | Comments (0) | TrackBack (0)

How Consumer Information Curtails Market Power in the Funeral Industry

Posted by D. Daniel Sokol

Thierry Blayac (Universite Montpellier 1)œ, Patrice Bougette (Universite de Nice–Sophia Antipolis)and Christian Montet (Universite de Polynesie francaise) explain How Consumer Information Curtails Market Power in the Funeral Industry.

ABSTRACT: The purpose of this article is to show, based on the case of the French market, that consumer perception of different funeral service offers, along with new entry in a special storing facility service (“chambre funéraire”), can be sufficient to impose competitive pressures on the various suppliers, including the former monopolist. With a discrete choice experiment implemented in Lyon, France, we find evidence that, contrary to widely shared beliefs about this specific market, demand for funeral services seems characterized by relatively high price elasticities, at least as soon as consumers are fully informed about the opportunities open to them in this market. Consumer behavior has actually changed in favor of a better assessment of the different possibilities of services supplied and of their relative price. We then implement simulations in local markets and show that, with good consumer information, the market po! wer of the supposedly dominant firm is much less important than it is generally believed. Furthermore, simulations stress the procompetitive effects of setting up a new storing facility by any businesses. We finally show that, if some improvements can still be brought to the functioning of this market, they should come from a better regulation of consumer information and of the entry of firms.

June 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Pharmaceutical prices under regulation: Tiered co-payments and reference pricing in Germany

Posted by D. Daniel Sokol

Annika Herr (Dusseldorf Institute of Competition Economics) and Moritz Suppliet (Dusseldorf Institute of Competition Economics) analyze Pharmaceutical prices under regulation: Tiered co-payments and reference pricing in Germany.

ABSTRACT: Many countries with national health care providers and health insurances regulate the market for pharmaceuticals to steer drug demand and to control expenses. For example, they introduce reference pricing or tiered co-payments to enhance drug substitution and competition. Since 2006, Germany follows an innovative approach by differentiating drug co-payments by the drug's price relative to its reference price. In this two-tier system, prescription drugs are completely exempted from co-payments if their prices undercut a certain price level relative to the reference price. We identify the effect of the policy on the prices of all affected prescription drugs and differentiate the analysis by firm types (innovative, generic, branded generic or importing firms). To identify a causal effect, we use a differences-in-differences approach and additionally exploit the fact that the exemption policy had been introduced successively! in the different clusters. We use quarterly data from 2007 to 2010 and find empirical evidence for differentiated price setting strategies by firm types, ranging from price decreases of -13.1% (branded generics firms) to increases of +2.0% (innovators) following the introduction of potential reductions in co-payments. We refer to the latter result as the co-payment exemption paradox. Our competition proxy (no. of firms) suggests a significant but small negative correlation with prices.

June 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 7, 2012

Patent Oppositions as Competitive Tools: An Analysis of the Major Players in the European Market of White Goods

Posted by D. Daniel Sokol

Alessandro STERLACCHINI (Universita Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali) explores Patent Oppositions as Competitive Tools: An Analysis of the Major Players in the European Market of White Goods.

ABSTRACT: This paper examines the role and determinants of patent oppositions between the main competitors in a given industry. Differently from previous studies, it is not concerned with high-tech firms but considers the major players in the European market of white goods. Thus, we are dealing with a medium-tech, scale intensive industry which, during the last two decades, has been characterised by a stagnating demand and decreasing unit values. As a result, the level of competition has increased, especially in terms of product quality and innovations. Among the consequences of that, the leading companies in Europe have not only intensified their patenting activities but also the usage of oppositions against the patents of direct competitors. By considering 961 patents granted by the EPO to the above companies over the period 2000-2005, the paper shows, among other things, that the probability of receiving an opposition from indu! stry rivals does not depend on the patent quality or value. Accordingly, it contends that, at least in the industries of this kind, the extent and direction of patent oppositions are mainly associated with idiosyncratic corporate characteristics and strategies.

June 7, 2012 | Permalink | Comments (0) | TrackBack (0)

The role of the interchange fee in card payment systems

Posted by D. Daniel Sokol

Eva Keszy-Harmath (Magyar Nemzeti Bank (central bank of Hungary)), Gergely Koczan (Magyar Nemzeti Bank (central bank of Hungary)), Surd Kovats (Hungarian Competition Authority (GVH)), Boris Martinovic (Hungarian Competition Authority (GVH)), and Kristof Takacs (Magyar Nemzeti Bank (central bank of Hungary)) explore The role of the interchange fee in card payment systems.

ABSTRACT: The interchange fee applied in four-party card systems transfers incomes in the payment card business from merchants to cardholders. Assessment of the interchange fee and the interpretation of its role have prompted serious professional debate in recent years. Beyond the professional debate, competition proceedings were also launched in connection with interbank agreements related to the interchange fee and the setting of the fee, but so far specific regulation has been adopted only in a few countries. The first part of the study describes the function of the interchange fee and the related economic theories, followed by a discussion of issues arising in connection with the interchange fee from the point of view of competition authorities and regulators. The second part of the study presents the results of analyses relating to the Hungarian payment card market and interchange fees. On the basis of these results, we conclude that prudent regulatory intervention, taking into account both primary and secondary market effects, may be justified in relation to the interchange fee, due to the structure and level of development of the Hungarian market.

June 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition between clearing houses on the European market

Posted by D. Daniel Sokol

Marie-Noelle Cales (Universite de Lyon) Laurent Granier (Universite de Lyon) and Nadege Marchand (Universite de Lyon) address Competition between clearing houses on the European market.

ABSTRACT: For several years, European financial markets have been the place of important mutations. These mutations have hit both stock markets themselves as well as the infrastructures including all necessary services for the transactions on financial securities. Among the market services to which the investors appeal, is the clearing of the orders, the service which allows reducing exchanged flows while guaranteeing their safety. The market of clearing became strongly competitive with the arrival of new Pan European clearing houses. Confronted with aggressive pricing policies, “incumbent” clearing houses have to adopt new strategies : merger, simple or mutual links of interoperability. We develop a model of industrial organization to appreciate the consequences of these various strategies in terms of price and social welfare. The strategic incentives of clearing houses and their effects on their customers, i.e. investors, ar! e observed by means of a sequential game. We show that the interoperability agreements are never reached at the equilibrium in spite of the fact that the "European code of good practice" of postmarkets incites them to accept this type of agreements. On the other hand, a merger between incumbent clearing houses can occur under some conditions. The merger is beneficial to these last ones as well as to the investors, but it is unfavourable to the Pan European clearing houses.

June 7, 2012 | Permalink | Comments (0) | TrackBack (0)

The Effects of a Megabank Merger on Firm-Bank Relationships and Borrowing Costs

Posted by D. Daniel Sokol

UCHINO Taisuke, Research Institute of Economy, Trade and Industry/Daito Bunka University and UESUGI Iichiro, Research Institute of Economy, Trade and Industry/Hitotsubashi University analyze The Effects of a Megabank Merger on Firm-Bank Relationships and Borrowing Costs.

ABSTRACT: Using a unique dataset of non-listed firms that identifies the banks with which firms transact, we examine the effects of the largest-ever bank merger in Japan—that between Bank of Tokyo-Mitsubishi (BTM) and UFJ Bank (UFJ) in 2005. We focus on how the merger affected firms through their firm-bank relationships. Specifically, we examine whether there are any differences in how the availability of loans evolved over time for firms that, prior to the merger, either transacted with both of the merged banks, with one of them, or with none. We find the following: (1) Firms that had transacted with both BTM and UFJ saw their borrowing costs increase by 40bp relative to those that had transacted with neither. (2) Firms that transacted with one of the two banks saw their borrowing costs increase by a smaller but still significant margin of 20bp relative to those that had transacted with neither. And (3) we do not find a signifi! cant difference in the extent that borrowing costs increased between firms that transacted with the acquiring bank (BTM) and those that transacted with the acquired bank (UFJ). These results suggest that the bank merger increased firms' borrowing costs partly through an exogenous decrease in the number of firm-bank relationships and partly through changes in the organizational structure of the merged bank, including a consolidation of the branch network.

June 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 6, 2012

New Developments in Merger Control in Turkey

Posted by D. Daniel Sokol

Bekir Kocabas & Sinan Bozkus (Turkish Competition Authority) describes New Developments in Merger Control in Turkey.

ABSTRACT: Turkish merger control regime has undergone a fundamental reform with the entrance of the new "Communique Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board ("Communique No. 2010/4" or the "New Communique")" in to force on January 1, 2011. This communiqué replaced its predecessor ("Communique No. 1997/1" or the "Former Communique") that had been applied without any significant change since November 1997. Then, "Guidelines on Undertakings Concerned, Turnover and Ancillary Restraints in Mergers and Acquisitions" and "Guidelines on Remedies that are Acceptable by the Turkish Competition Authority in Merger/Acquisition Transactions" also became effective in 2011.

Communique No. 2010/4 made important contributions to Turkish merger regime by changing notification thresholds and forms, changing assessment of joint ventures and ancillary restraints, providing a legal basis for consideration of efficiency gains, and accepting commitments as remedies in merger analysis. This short paper aims to explain the main changes in notification thresholds and their first results.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Bank diversification, market structure and bank risk taking: theory and evidence from U.S. commercial banks

Posted by D. Daniel Sokol

Martin Goetz (Federal Reserve Boston) has written on Bank diversification, market structure and bank risk taking: theory and evidence from U.S. commercial banks.

ABSTRACT: This paper studies how a bank’s diversification affects its own risk taking behavior and the risk taking of competing, nondiversified banks. By combining theories of bank organization, market structure and risk taking, I show that greater geographic diversification of banks changes a bank’s lending behavior and market interest rates, which also has ramifications for nondiversified competitors due to interactions in the banking market. Empirical results obtained from the U.S. commercial banking sector support this relationship as they indicate that a bank’s risk taking is lower when its competitors have a more diversified branch network. By utilizing the state-specific timing of a removal of intrastate branching restrictions in two identification strategies, I further pin down a causal relationship between the diversification of competitors and a bank’s risk taking behavior. These findings indicate that a bank’s! diversification also impacts the risk taking of competitors, even if these banks are not diversifying their activities.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Benefits to Society from Health Care Expenses: Do We Get More for Higher Spending?

Posted by D. Daniel Sokol

Rosa Abrantes-Metz (Global Economics Group and NYU) asks Benefits to Society from Health Care Expenses: Do We Get More for Higher Spending?

ABSTRACT: This article is motivated by the recent health care reform and the general debate on the issues facing the industry, in the wake of the upcoming Supreme Court decision on the matter.

It has been argued that the United States spends more on health care as a percentage of its GDP than any other industrialized country, and that presumably is inherently bad. In order to test this presumption, I put forward two simple international comparisons to study whether more spending in health care is correlated with higher benefits across multiple countries. The results confirm that to be the case. I further argue that much of the debate over health care reform in the United States has been focused solely on short-run (even static) analysis without consideration for longer-term efficiencies. It is important to keep in mind that it is today’s costly innovation which allows for better quality health care tomorrow. Imposing policies which punish innovation as a way to reduce costs can lead to lower costs today, but it may not be true that they will lead to lower costs tomorrow – particularly if cost is measured in units of quality care. Indeed, I argue that “total health care expenditures” is not the relevant metric for policymakers, but rather that the price of one unit of constant quality health care is a more appropriate concept. Unfortunately to my knowledge such measures have yet to be appropriately developed.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Competitive Neutrality: Maintaining a level playing field between public and private business

Posted by D. Daniel Sokol

The OECD has published Competitive Neutrality: Maintaining a level playing field between public and private business.

ABSTRACT: What are the existing practices related to competitive neutrality today? What are the challenges faced by policy makers when maintaining a level playing field between the public and private sectors? This newly published OECD report provides a catalogue of national practices that illustrate related implementation issues and highlights examples of challenges that may be encountered. It is organised around eight “building blocks” that governments should address if they seek to obtain competitive neutrality.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Earnings and Ratings at Google Answers

Posted by D. Daniel Sokol

Benjamin G. Edelman, Harvard University - HBS Negotiations, Organizations and Markets Unit, describes Earnings and Ratings at Google Answers.

ABSTRACT: I analyze questions and answers from Google Answers. More experienced answerers provide answers with the characteristics askers most value, receiving higher ratings as a result. Answerer earnings increase in experience. Answerers who focus on particular question categories provide answers of higher quality but earn lower pay per hour. Answers provided during the business day receive higher payment per hour, but more experienced answerers tend to favor work at other times.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

The Essential Facilities Doctrine – What was Wrong in Microsoft?

Posted by D. Daniel Sokol

Liyang Hou, KoGuan Law School, Shanghai Jiao Tong University asks The Essential Facilities Doctrine – What was Wrong in Microsoft?

ABSTRACT: The essential facilities doctrine is designed to oblige dominant undertakings to make available their important facilities, including intellectual property rights, for other undertakings. It requires a delicate balance of, on the one hand, protecting the exclusivity of ownership and on the other hand encouraging other undertakings’ incentive to innovate. The balance that was nicely struck in the previous cases nevertheless was abandoned in the Microsoft judgment. In that case, the General Court made two mistakes: First, it wrongly defined the primary market as client PC operating systems that was in no accordance with the request of Sun, i. e. the interoperability information with Windows client PC operating system. This broader market definition made the General Court struggle in justifying the increasing market shares of Linux products through unnecessarily expanding the scope of ‘‘eliminating all the competition’’ from the requesting undertakings to ‘‘eliminating all effective competition’’. Secondly, the General Court improperly interpreted ‘‘new products’’ hindered by a refusal to grant a license as also including products with ‘‘technical development’’. This arbitrary extension encroaches upon the very substance of the system of intellectual property rights.

June 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 5, 2012

The Perils of Classifying Social Media Platforms as Public Utilities

Posted by D. Daniel Sokol

Adam D. Thierer, George Mason University - Mercatus Center warns on The Perils of Classifying Social Media Platforms as Public Utilities.

ABSTRACT: To the extent public utility-style regulation has been debated within the Internet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet. The question has been whether Internet service providers should be considered “essential facilities” or “natural monopolies” and regulated as public utilities. The debate over “net neutrality” regulation has been animated by such concerns.

While that debate still rages, the rhetoric of public utilities and essential facilities is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer. More recently, there have been rumblings within academic and public policy circles regarding whether social media platforms, especially social networking sites, might also possess public utility characteristics. Presumably, such a classification would entail greater regulation of those sites’ structures and business practices.

Proponents of treating social media platforms as public utilities offer a variety of justifications for regulation. Amorphous “fairness” concerns animate many of these calls, but privacy and reputational concerns are also frequently mentioned as rationales for regulation. Proponents of regulation also sometimes invoke “social utility” or “social commons” arguments in defense of increased government oversight, even though these notions lack clear definition.

Social media platforms do not resemble traditional public utilities, however, and there are good reasons why policymakers should avoid a rush to regulate them as such. Treating these nascent digital services as regulated utilities would harm consumer welfare because public utility regulation has traditionally been the archenemy of innovation and competition. Furthermore, treating today’s leading social media providers as digital essential facilities threatens to convert “natural monopoly” or “essential facility” claims into self-fulfilling prophecies. Related proposals to mandate “API neutrality” or enforce a “Separations Principle” on integrated information platforms would be particularly problematic. Such regulation also threatens innovation and investment. Marketplace experimentation in search of sustainable business models should not be made illegal.

Remedies less onerous than regulation are available. Transparency and data-portability policies would solve many of the problems that concern critics, and numerous private empowerment solutions exist for those users concerned about their privacy on social media sites.

Finally, because social media are fundamentally tied up with the production and dissemination of speech and expression, First Amendment values are at stake, warranting heightened constitutional scrutiny of proposals for regulation. Social media providers should possess the editorial discretion to determine how their platforms are configured and what can appear on them.

June 5, 2012 | Permalink | Comments (0) | TrackBack (0)

Entry, Imperfect Competition, and Futures Market for the Input

Posted by D. Daniel Sokol

Georges Dionne, HEC Montreal - Department of Finance and Marc Santugini, HEC Montreal, Institute of Applied Economics discuss Entry, Imperfect Competition, and Futures Market for the Input.

ABSTRACT: We analyze firms’ production and hedging decisions under imperfect competition with potential entry. Specifically, we consider an oligopoly industry producing a homogeneous output in which risk-averse firms incur a sunk cost upon entering the industry, and, then, compete in Cournot with one another. Each firm faces uncertainty in the input cost when making production decision, and has access to the futures market to hedge its random cost. We provide two sets of results. First, we show that there exists a unique equilibrium in which, in contrast to previous results in the literature, production and output price depend on the distribution of the spot price and risk aversion, i.e., there is no separation when the firms have access to the futures market. Second, we study the effect of access to the futures market on entry, production, and prices. The effect of access to the futures market on the number of firms is ambiguous depending on the value of the futures price and the parameters of the model. We also show that hedging induces the risk-averse firm to produce more, while speculating reduces production.

June 5, 2012 | Permalink | Comments (0) | TrackBack (0)

Retail Price Stickiness, Market Structure and Distribution Channels

Posted by D. Daniel Sokol

Takayasu Matsuoka (Institute of Economic Research, Hitotsubashi University) analyzes Retail Price Stickiness, Market Structure and Distribution Channels.

ABSTRACT: Using Japanese scanner data of transaction prices and sales for more than 1,600 commodity groups from 1988 to 2008, we find a statistically significant negative correlation between the frequency of price changes and the degree of market concentration. We also find that structural factors of a distribution channel are significantly correlated with rigidity in retail prices. Decomposing the frequency of price changes into the frequency of intraday, sale, and regular price changes, we find that both inter- and intra-brand competition positively affect the frequency of sales. Inter-brand competition among manufacturers has a significant and positive effect on the frequency of regular price changes, whereas intra-brand competition among retailers has no such significant effect. We also document that the term of contracts between manufacturers and retailers has a significant and positive effect on price stickiness.

June 5, 2012 | Permalink | Comments (0) | TrackBack (0)

Papers for the June 2012 OECD Competition Meetings now available

Posted by D. Daniel Sokol

Papers for the June 2012 OECD Competition Meetings now available 5th June 2012

The OECD today put up a series of papers by its own staff and external experts featuring the main topics of its forthcoming Competition Committee meetings being held in June at the OECD’s headquarters in Paris.

The papers relate to discussions to be held by the Committee over its four days of meetings in Paris between June 11th and 14th. Papers can be accessed at http://www.oecd.org/document/43/0,3746,en_2649_37463_48742443_1_1_1_37463,00.html

Evaluating the Impact of Competition Interventions (Monday June 11th) In February 2012, it was decided that the OECD would work intensively on this topic over the next three years. This first discussion will be a stocktaking exercise on what competition authorities currently do, or have done, in evaluating the impact of their competition enforcement and advocacy activities.

The paper on the website, by Dr Peter Ormosi, sets out some of the main areas that he has identified as being of interest.

International co-operation in competition enforcement (Tuesday June 12th) The OECD has selected this topic as its other main area of work on competition over the next few years, looking at how competition agencies can work across borders more effectively to enforce competition law. The initial discussion will consider the OECD and other international organisations’ previous work in this area. No papers are publicly available for this topic at present.

Hearing on Behavioural Economics (Wednesday June 13th)

Behavioural economics uses approaches from psychology and sociology to probe the limitations of neoclassical economics’ rationality assumptions. A panel of experts, including Professors Xavier Gabaix (New York University), Steffen Huck (University College London) and Maurice Stucke (University of Tennessee), will discuss this issue and answer questions from delegates. Papers by these three participants (some of them previously published) are available on the website.

Roundtable on Market Definition (Thursday June 14th)

Prof. Ulrich Schwalbe (University of Hohenheim, Germany), Mr. Jorge Padilla (Compass Lexecon) and Judge Niels Wahl from the EU General Court will debate this fundamental concept of competition policy with participants from competition agencies. Alternative economic approaches that measure unilateral effects of economic behaviour directly without the need to first define the relevant market will be discussed, among other recent developments in market definition.

A paper by Prof. Schwalbe and the OECD Secretariat is available on the website.

Compilations of papers, with expert and country contributions and summaries of discussion, will be published for some of these sessions later in the year.

June 5, 2012 | Permalink | Comments (0) | TrackBack (0)