Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, June 19, 2012

The industrial organization of competition in local bus services

Posted by D. Daniel Sokol

Philippe Gagnepain (CES - Centre d'economie de la Sorbonne - Universite Paris I - Pantheon Sorbonne, Ecole d'Economie de Paris - Paris School of Economics), Marc Ivaldi (TSE - Toulouse School of Economics ) and Catherine Vibes (TSE - Toulouse School of Economics ) describe The industrial organization of competition in local bus services.

ABSTRACT: This article is aimed at deepening our understanding of the functioning of competition in the local bus transportation industry and to evaluate its effectiveness. It provides an overview of the competitive constraints that are at work in the industry as discussed in the economic literature, and sketches empirical tests to check whether the intuitions provided by the economists are in line with the reality of the industry.

June 19, 2012 | Permalink | Comments (0) | TrackBack (0)

Cournot Markets

Posted by D. Daniel Sokol

Khadidja Benallou (UFR de sciences economiques et de gestion, Universite de Caen Basse-Normandie), Daniel Danau (UFR de sciences economiques et de gestion, Universite de Caen Basse-Normandie) and Abderrahmane Ziad (UFR de sciences economiques et de gestion, Universite de Caen Basse-Normandie) describe Cournot Markets.

ABSTRACT: This paper focuses on the existence of a Cournot equilibrium in a n- firm Cournot market for a single homogeneous commodity. Using a simple argument and proof, it shows that a Cournot equilibrium exists if each firm's marginal revenue declines with its own output and some weak non-decreasing incremental cost condition is satisfied.

June 19, 2012 | Permalink | Comments (0) | TrackBack (0)

Monday, June 18, 2012

United State v. Apple and the Contemporary Legitimacy of Antitrust

Posted by D. Daniel Sokol

Chris Sagers (Cleveland State Univ.) has written on United State v. Apple and the Contemporary Legitimacy of Antitrust.

ABSTRACT: I think United States v. Apple, the so-called "e-Books case" pending in the Southern District of New York, is an excellent case for the government (the Department of Justice's Antitrust Division "DOJ"), put together by an exceptional team of government enforcers, and I think the defendants that remain in the case are likely to lose if they proceed to judgment. The complaint has been the talk of the blogosphere, surprising observers with the extent of its damning, meticulous factual detail and amazing them that defendants' executives could have thought what they were doing was legal.

The hub-and-spoke conspiracy the case describes, if proven, is pretty obviously per se illegal under Supreme Court precedent and a celebrated Seventh Circuit case. And even if it weren't, the underlying economic story has intuitive appeal: A major retailer entrant agrees with a manufacturing oligopoly, in exchange for a share of the spoils, to assist in coercion of the incumbent retailer, which got its dominant position through price-cutting. Motive, opportunity, plausibility. It was a conspiracy against the public, of a kind going to the core concerns of antitrust, and as a matter of legal doctrine it seems pretty simple.

So here's my big question: Why does everybody seem to hate this case?

June 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Estimating market power in homogenous product markets using a composed error model: application to the California electricity market

Posted by D. Daniel Sokol

Luis Orea (University of Oviedo) and Jevgenijs Steinbuks (Purdue) are Estimating market power in homogenous product markets using a composed error model: application to the California electricity market.

ABSTRACT: This study contributes to the literature on estimating market power in homogenous product markets. We estimate a composed error model, where the stochastic part of the firm’s pricing equation is formed by two random variables: the traditional error term, capturing random shocks, and a random conduct term, which measures the degree of market power. Treating firms’ conduct as a random parameter helps solving the issue that the conduct parameter can vary between firms and within firms over time. The empirical results from the California wholesale electricity market suggest that realization of market power varies over both time and firms, and reject the assumption of a common conduct parameter for all firms. Notwithstanding these differences, the estimated firm-level values of the conduct parameter are closer to Cournot than to static collusion across all specifications. For some firms, the potential for realization of t! he market power unilaterally is associated with lower values of the conduct parameter.

June 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Dynamic Pricing, Advance Sales, and Aggregate Demand Learning in Airlines

Posted by D. Daniel Sokol

Diego Escobari, The University of Texas - Pan American Dynamic Pricing, Advance Sales, and Aggregate Demand Learning in Airlines.

ABSTRACT: This paper uses a unique U.S. airlines panel data set to empirically study the dynamic pricing of inventories with uncertain demand over a finite horizon. I estimate a dynamic pricing equation and a dynamic demand equation that jointly characterize the adjustment process between prices and sales as the flight date nears. I find that the price increases as the inventory decreases, and decreases as there is less time to sell. Consistent with aggregate demand learning and price adjustment, demand shocks have a positive and much larger effect on prices than the positive effect of anticipated sales.

June 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Antitrust Litigation in China – A Step Forward

Posted by D. Daniel Sokol

James Modrall, Matthew Bachrack & Cunzhen Huang (Cleary) discuss Antitrust Litigation in China – A Step Forward.

ABSTRACT: The legal basis for private antitrust civil litigation in China is Article 50 of China’s Anti-Monopoly Law (the “AML”), which provides that “[w]here the monopolistic conduct of an undertaking has caused losses to another person, it shall bear civil liability according to law.” Since the AML entered into force on August 1, 2008, Chinese parties believing themselves to have been harmed by anti-competitive conduct have had more success in getting the attention of Chinese courts than of Chinese antitrust authorities. Chinese courts have reportedly accepted 61 antitrust cases and ruled on 53, although the courts have so far generally ruled in favor of the defendants. By contrast, China’s anti-monopoly enforcement authorities (the “AMEAs”) have been relatively inactive in non-merger enforcement of the AML. The National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”) have issued very few decisions regarding domestic cartels and have publicly reported only three abuse-of-dominance investigations. The legal framework for Chinese antitrust litigation took a significant step forward on June 1, 2012, when the judicial interpretation (the “Judicial Interpretation”) of China’s Supreme People’s Court (the “SPC”) regarding private civil litigation under the AML took effect. This is the first SPC judicial interpretation addressing the AML.

June 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition between clearing houses on the European market

Posted by D. Daniel Sokol

Marie-Noelle Cales (GATE Lyon Saint-Etienne - Universite Lumiere - Lyon II - Ecole Normale Superieure - Lyon), Laurent Granier (GATE Lyon Saint-Etienne - Universite Lumiere - Lyon II - Ecole Normale Superieure - Lyon) and Nadege Marchand (GATE Lyon Saint-Etienne - Universite Lumiere - Lyon II - Ecole Normale Superieure - 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, are 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 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition Between Mail and Electronic Substitutes in the Financial Sector: A Hotelling Approach

Posted by D. Daniel Sokol

Helmuth Cremer (Toulouse School of Economics (GREMAQ, IDEI and Institut universitaire de France)) Philippe De Donder (Toulouse School of Economics (GREMAQ-CNRS and IDEI)), Paul Dudley (Head of Regulatory Economics, Royal Mail Group) and Frank Rodriguez (Associate, Oxera) explore Competition Between Mail and Electronic Substitutes in the Financial Sector: A Hotelling Approach.

ABSTRACT: We build a model where two banks compete for the patronage of consumers by offering them, among other services and products, two forms of transactional media: paper statements and electronic substitutes. Both banks and both products are horizontally differentiated and modeled a la Hotelling(1929). Assuming symmetry of consumer preferences (over banks and, independently, over the two transactional media) and of bankss costs, we obtain that the unique profit-maximizing symmetrical prices reect both the transactional media marginal costs and the intensity of competition between banks. Most notably, the intensity of consumers preferences for one variant of transactional medium over another has no inuence on the profit-maximizing media prices. Also, there is total pass-through of increases in input prices (such as mail price for paper statements) into prices paid by final consumers.

June 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 17, 2012

Can Consumer Choice Promote Trans-Atlantic Convergence of Competition Law and Policy?

Posted by D. Daniel Sokol

Tom Rosch (FTC) asks Can Consumer Choice Promote Trans-Atlantic Convergence of Competition Law and Policy? in a recent speech.

June 17, 2012 | Permalink | Comments (0) | TrackBack (0)