Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, July 17, 2012

Less pain at the pump? The effects of regulatory interventions in retail gasoline markets

Posted by D. Daniel Sokol

Ralf Dewenter, University of Dusseldorf and Ulrich Heimeshoff, University of Dusseldorf analyze Less pain at the pump? The effects of regulatory interventions in retail gasoline markets.

ABSTRACT: Increasing price levels, high price volatility and the suspicion of collusive behavior are important topics of public debates on competition in retail gasoline markets in many countries. Several governments and competition authorities introduced fuel price regulations in form of restrictions on the frequencies of fuel price changes per day. We present empirical evidence of the effects of fuel price regulation in Austria and Western Australia using difference-in-differences methods to estimate treatment effects of the implementation of such pricing rules. Our estimates provide evidence that fuel price levels in Austria decreased after implementation of regulation. However, we cannot find robust significant effects of regulation on fuel price levels in Western Australia.

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

Monday, July 16, 2012

Market Structure and Market Performance in E-Commerce

Posted by D. Daniel Sokol

Franz Hackl Johannes Kepler University Linz - Department of Economics, Michael Kummer Johannes Keppler University, Rudolf Winter-Ebmer, Johannes Kepler University Linz - Department of Economics; Institute for Advanced Studies (IHS) - Department of Economics & Finance; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA) and Christine Zulehner, University of Vienna - Faculty of Business, Economics, and Statistics; Austrian Institute of Economic Research (WIFO) address Market Structure and Market Performance in E-Commerce.

ABSTRACT: We investigate the causal effect of market structure on market performance in the consumer electronics. We combine data from Austria’s largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game over the whole product lifecycle. Using this information for 70 digital cameras, we generate instrumental variables for the number of firms in the market based on the shops’ entry decisions on other product markets in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price leader.

July 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition and Regulation in Italy

Posted by D. Daniel Sokol

Magda Bianco, Bank of Italy, Silvia Giacomelli, Bank of Italy, and Giacomo Rodano, Bank of Italy describe Competition and Regulation in Italy.

ABSTRACT: Insufficient competition remains a major obstacle to growth in Italy. The main culprits include the institutional environment and the regulations governing some economic sectors subject to market failures. As to the former, relative neglect of economic efficiency has produced an unstable and inconsistent regulatory framework, excessive administrative burdens, and an inefficient system of contract enforcement. Past attempts to reform this area have yielded poor results. As to the latter, regulation was satisfactory only in some sectors. The excessive number of activities in which some operators enjoyed exclusive rights to provide services and restrictive regulation hindered competition in professional services. Growing awareness of the importance of competition policies to foster growth has given new impetus to the implementation of a wide programme of liberalization and institutional reform.

July 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Reimbursement and Investment: Propsective Payment and For-Profit Hospitals' Market Share

Posted by D. Daniel Sokol

Seungchul Lee and Robert Rosenman (School of Economic Sciences, Washington State University) discuss Reimbursement and Investment: Propsective Payment and For-Profit Hospitals' Market Share.

ABSTRACT: This paper studies how the change from retrospective cost-based reimbursement to a prospective payment system shifted hospital investment strategies from quality-enhancing technologies to cost-saving technologies. A consequence of this change was the opportunity for for-profit hospitals to capture a larger share of the market. When all of a patient’s treatment costs are paid under a retrospective average cost-based program, not-for-profit hospitals invest only in the quality-enhancing technology. For-profit hospitals have no incentive to invest in either technology. As a result, most patients select not-for-profit hospitals and for-profit hospitals attract only those few patients who have extreme time preference. When hospitals are reimbursed prospectively, however, not-for-profit hospitals invest in both quality-improving and the costsaving technologies, as do for-profit hospitals, although at lesser amounts. Quality ! and market shares are more equal under prospective payment, helping to explain the increasing market share of for-profit hospitals as prospective payment has become the norm.

July 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Keep to sustain or keep to exploit? Why firms keep hard evidence

Posted by D. Daniel Sokol

Panayiotis Agisilaou (University of East Anglia) answers Keep to sustain or keep to exploit? Why firms keep hard evidence.

ABSTRACT: We develop a model wherein collusive firms' decisions to keep or to destroy the hard evidence is endogenous. Unlike previous literature, we assume that the administration of the cartel crucially depends on the existence of the hard evidence. Within this framework, we explore the impact of a leniency program on whether firms' incentives are to destroy or to keep the hard evidence. Moreover, we examine firms' incentives to report or not to report the hard evidence to the antitrust authority. We show that firms may willfully keep the hard evidence, even if a leniency program is not available, in order to enhance the stability of the cartel. Additionally, we prove that firms are more inclined to keep the hard evidence when a leniency program is available. Finally, we demonstrate that firms are more likely to destroy the hard evidence when the collusive profits-fine ratio increases.

July 16, 2012 | Permalink | Comments (0) | TrackBack (0)