Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, August 4, 2012

OECD, Economic Evidence in Merger Analysis

Posted by D. Daniel Sokol

The OECD has published on Economic Evidence in Merger Analysis.

ABSTRACT: The OECD Competition Committee debated economic evidence in merger analysis in February 2011. This document includes an executive summary of that debate and the documents from the meeting: a background note by Prof. Mike Walker for the OECD and written submissions: Austria, Brazil, Canada, Chile, China, Denmark, Finland, France, Germany, Greece, Hungary, Indonesia, Israel, Japan, Korea, Mexico, Netherlands, New Zealand, Portugal, Romania, Russian Federation, South Africa, Sweden, Switzerland, Chinese Taipei, Turkey, United Kingdom, United States, the European Union, and BIAC as well as an aide-memoire of the discussion.

August 4, 2012 | Permalink | Comments (0) | TrackBack (0)

Abuse of Regulatory Procedures in the Pharmaceutical Sector—Developments Since the General Court's Judgment in AstraZeneca

Posted by D. Daniel Sokol

Kristina Nordlander & Patrick Harrison (Sidley Austin) address Abuse of Regulatory Procedures in the Pharmaceutical Sector—Developments Since the General Court's Judgment in AstraZeneca.

ABSTRACT: In June 2005, the European Commission issued a decision finding that AstraZeneca had breached Article 102 TFEU by engaging in conduct aimed at blocking or delaying market access for generic alternatives to its blockbuster Losec product. The decision was highly controversial at the time, and the Commission acknowledged that it was making "novel" findings of abuse of regulatory procedures, but, in July 2010, the EU's General Court handed down a judgment largely upholding the Commission's decision. Many commentators-including the authors of this article-thought at the time that the terms of the General Court's judgment might embolden the Commission and the EU Member States' National Competition Authorities in their enforcement of Article 102 TFEU in the pharmaceutical sector.

This article explores key developments in the concept of abuse as applied in the pharmaceutical sector since the General Court's landmark July 2010 judgment in AstraZeneca. The article focuses on: (i) the April 2011 decision of the Office of Fair Trading in relation to Reckitt Benckiser; (ii) the January 2012 Autorità Garante della Concurrenza e del Mercato decision in relation to Pfizer Italy; and (iii) the May 2012 Opinion of Advocate General Mazak in the appeal to the European Court of Justice of the General Court's AstraZeneca judgment itself.

The authors conclude that NCAs do indeed appear to have been emboldened in their enforcement of Article 102 TFEU in the pharmaceutical sector and that in subtle, but important, ways, recent NCA decisions may have expanded the notion of abuse of regulatory procedures which lay at the heart of the Commission's seminal AstraZeneca case. Indeed, it even appears from the Pfizer Italy decision, that NCAs may be using the observations made by the Commission in its 2008-2009 Pharmaceutical Sector Inquiry as a means of further expanding the concept of abuse as set out in AstraZeneca. Before addressing these developments, it may be helpful to summarize the key findings in the AstraZeneca case itself.

August 4, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, August 3, 2012

Freedom of Choice - The Emergence of a Powerful Concept in European Competition Law

Posted by D. Daniel Sokol

Paul Nihoul, Universite Catholique de Louvain discusses Freedom of Choice - The Emergence of a Powerful Concept in European Competition Law.

ABSTRACT: Is Europe engaging on a path leading to the transformation of its competition policy? In the last years, the European Commission has adopted landmark decisions placing to the foreground a concept that had so far gained limited attention – the concept of choice, that is, the possibility, and the right, for customers, to choose freely the products/services best corresponding to their needs, and the economic partners they want to deal with.

August 3, 2012 | Permalink | Comments (0) | TrackBack (0)

TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy eJournal June 4, 2012 to August 3, 2012

Posted by D. Daniel Sokol

TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy eJournal June 4, 2012 to August 3, 2012.

Rank Downloads Paper Title
1 244 The Antitrust/Consumer Protection Paradox: Two Policies at War with Each Other
Joshua D. Wright,
George Mason University - School of Law, Faculty,
Date posted to database: May 31, 2012
Last Revised: May 31, 2012
2 237 Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement
D. Daniel Sokol,
University of Florida - Levin College of Law,
Date posted to database: June 7, 2012
Last Revised: July 16, 2012
3 175 The Implications of Behavioral Antitrust
Maurice E. Stucke,
University of Tennessee College of Law,
Date posted to database: July 17, 2012
Last Revised: July 17, 2012
4 167 The Oral Hearing in Competition Proceedings Before the European Commission
Wouter P. J. Wils, Wouter P. J. Wils,
European Commission, University of London - School of Law,
Date posted to database: May 3, 2012
Last Revised: June 18, 2012
5 141 Citizen Petitions: An Empirical Study
Michael A. Carrier, Daryl Wander,
Rutgers University School of Law - Camden, Unaffiliated Authors - affiliation not provided to SSRN,
Date posted to database: June 4, 2012
Last Revised: June 4, 2012
6 138 The Role of the Hearing Officer in Competition Proceedings Before the European Commission
Wouter P. J. Wils, Wouter P. J. Wils,
European Commission, University of London - School of Law,
Date posted to database: May 3, 2012
Last Revised: May 7, 2012
7 90 Google, in the Aftermath of Microsoft and Intel: The Right Approach to Antitrust Enforcement in Innovative High Tech Platform Markets?
Fernando Diez,
University of Antonio de Nebrija,
Date posted to database: June 12, 2012
Last Revised: June 26, 2012
8 140 Dynamic Analysis and the Limits of Antitrust Institutions
Douglas H. Ginsburg, Joshua D. Wright,
U.S. Court of Appeals for the District of Columbia, George Mason University - School of Law, Faculty,
Date posted to database: June 14, 2012
Last Revised: June 17, 2012
9 114 Optimal Antitrust Remedies: A Synthesis
William H. Page,
University of Florida - Fredric G. Levin College of Law,
Date posted to database: May 17, 2012
Last Revised: July 29, 2012
10 111 An Economic Analysis of the AT&T-T-Mobile USA Wireless Merger
Stanley M. Besen, Stephen Kletter, Serge Moresi, Steven C. Salop, john woodbury,
Charles River Associates (CRA), Charles River Associates (CRA), Charles River Associates (CRA), Georgetown University Law Center, Charles River Associates (CRA),
Date posted to database: April 25, 2012
Last Revised: April 25, 2012

August 3, 2012 | Permalink | Comments (0) | TrackBack (0)

On Price Recognition and Competition with Boundedly Rational Consumers

Posted by D. Daniel Sokol

Vahid Mojtahed, Ca' Foscari University writes On Price Recognition and Competition with Boundedly Rational Consumers.

ABSTRACT: We study an extension of the model of Rubinstein (1993) to two firms, competing in a market with consumers who are boundedly rational with respect to processing information. The cognitive bound forces customers to partition the price space. Rubinstein shows that a monopolist is able to earn a higher profit by exploiting consumers’ lack of processing ability. We extend his model to a duopoly, and show the Nash and Correlated equilibria of the game. We prove that in competition, whether firms choose their strategies independently or dependently, firms’ joint profit is lower than in a monopoly but does not vanish completely. The uncertainty regarding the consumers’ cutoff point and differences across firms’ prices impel firms to set their prices equal to the marginal cost.

August 3, 2012 | Permalink | Comments (0) | TrackBack (0)

European Commission Enforcement in the Pharmaceutical Sector: Less Than Expected? The Boehringer Case Closure Suggests as Much

Posted by D. Daniel Sokol

Sean-Paul Brankin (Crowell Moring) notes European Commission Enforcement in the Pharmaceutical Sector: Less Than Expected? The Boehringer Case Closure Suggests as Much.

ABSTRACT: On July 6, 2011, the European Commission closed the case file in its Boehringer/Almirall investigation. It did so without a formal decision, without formal remedies, and without imposing a fine. There is nothing necessarily remarkable about that. Sometimes an investigation simply reveals that there is no case to answer and the file must be closed. But here, something more interesting seems to have been going on. In effect, the Commission reached an informal settlement with Boehringer involving no penalty. In context, that was a curious decision: this was the first definitive enforcement action (albeit informal) taken by the Commission in the wake of the Pharmaceutical Sector Inquiry. That suggests something significant about the likely extent of the Commission's enforcement of EU antitrust rules in the pharmaceutical sector. Teasing out what requires a more detailed look at the underlying facts and the overall context.

August 3, 2012 | Permalink | Comments (0) | TrackBack (0)

A Global Collection: Review of Lianos' & Sokol's the Global Limits of Competition Law

Posted by D. Daniel Sokol

Max Huffman, Indiana University Robert H. McKinney School of Law has posted A Global Collection: Review of Lianos' & Sokol's the Global Limits of Competition Law.

Abstract: The Global Limits of Competition Law is the first installment in Danny Sokol’s and Ioannis Lianos’ ambitious new series from Stanford University Press, Global Competition Law and Economics. The project is ambitious because it takes on a potentially unbounded topic and one that is constantly changing. It is also ambitious because Sokol and Lianos enter a saturated market. This first volume is sufficiently captivating, and represents such an extraordinary breadth of national and regional perspectives, that they appear to have fulfilled their ambitions.

August 3, 2012 | Permalink | Comments (1) | TrackBack (0)

Thursday, August 2, 2012

Section 2 Enforcement and the Great Recession: Why Less (Enforcement) Might Mean More (GDP)

Posted by D. Daniel Sokol

Alan J. Meese, William & Mary Law School has written on Section 2 Enforcement and the Great Recession: Why Less (Enforcement) Might Mean More (GDP).

ABSTRACT: Section 2 of the Sherman Act bans monopolization of any part of interstate commerce. This essay draws on macroeconomic theory and the New Deal experience with partial repeal of the antitrust laws and cartelization of labor to examine the relationship between macroeconomic stability and the standards courts employ when evaluating Section 2 claims. In particular, the essay evaluates the contention by President Obama's Antitrust Division that purportedly lax enforcement of Section 2 by the Bush Administration helped bring about the recent Great Recession. The essay also evaluates the related claim that more aggressive enforcement focused on maximizing the welfare of purchasers in the monopolist's market at the expense of society’s overall economic welfare would help forestall and ameliorate economic downturns.

Shortly after President Obama took office, the Antitrust Division of the Department of Justice repudiated a 2008 report that had articulated the Bush Administration’s Section 2 enforcement policy. In so doing, Christine Varney, Assistant Attorney General in charge of the Antitrust Division, claimed that President Bush’s Section 2 policy was insufficiently interventionist and partly responsible for the Great Recession. In particular, Ms. Varney singled out the Bush Administration’s conclusion that conduct by a monopolist only violates Section 2 if it results in harm to consumers in the relevant market that is “disproportionate” to the magnitude of productive or other efficiencies. According to Ms. Varney, the Bush Administration’s “disproportionality” standard echoed the pro-cartel stance of early New Deal legislation, unfairly privileged producers over consumers and stultified economic recovery. A more interventionist and pro-consumer standard would, she said, combat the downturn and encourage recovery.

Both macroeconomic theory and empirical evidence confirm the Obama Administration's claim that the New Deal's cartelization of wages and prices exacerbated the Great Depression and concomitantly slowed recovery. During the early 1930s, the Roosevelt Administration imposed so-called “codes of fair competition,” which encouraged or mandated wage and price fixing, on over 500 American industries pursuant to the National Industrial Recovery Act (“NIRA”). After the Supreme Court unanimously voided the NIRA, Congress re-imposed the NIRA's wage cartel policy by passing the National Labor Relations Act (“NLRA”). Both the NIRA codes and NLRA wage-fixing interfered with the normal process of macroeconomic adjustment, whereby a downward shift in the aggregate demand schedule results in lower prices, a larger real money supply, and thus a rebound in demand which, given a vertical supply curve, restores output to its pre-recession levels. Price floors, of course, prevented prices from falling and thus dampened the response of aggregate demand, while wage floors increased real wages and the cost of production, thereby altering the shape of the aggregate supply curve and reducing aggregate output.

However, any analogy between New Deal wage and price cartels and the Bush Administration’s “disproportionality” standard is strained at best. Under long-standing Section 2 case law, a monopolist’s conduct that excludes rivals from the market is nonetheless lawful whenever such conduct constitutes “competition on the merits” or is otherwise necessary to effectuate such competition by producing significant efficiencies, regardless whether any resulting harm exceeds or greatly exceeds the conduct’s benefits. Thus, the Bush Administration’s “disproportionality” standard was in fact more interventionist than authorized by current law, in that it purported to condemn some conduct that is necessary to produce significant efficiencies and thus unobjectionable, simply because such conduct visits “disproportionate” harm on consumers in the relevant market. Of course, the standard suggested by the Obama Administration, focused on the welfare of consumers simpliciter, would be more interventionist still, banning, as it would, any conduct that raised consumer prices, regardless of the conduct’s overall efficiency impact.

Thus, conduct that survives scrutiny under the disproportionality test but fails a more intrusive consumer welfare test bears only passing resemblance to New Deal-style wage and price fixing. Unlike New Deal labor and producer cartels, which immunized conduct that unambiguously misallocated resources and destroyed wealth, the Bush Administration’s disproportionality standard shielded conduct that likely produces more wealth than it destroys and thus enhances national output in the long run. To be sure, a novel and more intrusive standard focused solely on the welfare of consumers would ban additional price-increasing conduct. However, such conduct would survive scrutiny under the disproportionality test because it produces significant efficiencies. Because the “consumer harm” resulting from such conduct is almost entirely distributional in nature, these efficiencies will generally outweigh, sometimes by a wide margin, the negative consequences of the misallocation of resources caused by any monopolistic output reduction. Moreover, such efficiencies free up productive resources that flow to other industries, thus enhancing output and lowering prices outside the monopolized market and increasing the nation’s potential output. Banning conduct that raises prices but would have survived the Bush Administration’s disproportionality test will thus have an ambiguous effect on the overall price level and reduce the nation’s GDP in the long run. Antitrust should leave macroeconomic stabilization to fiscal and monetary policy and focus on what it does best, namely, identifying and condemning conduct that on balance results in a misallocation of resources and thus reduction in total economic surplus. More intrusive regulation will likely mean less potential output and thus less GDP.

August 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition in Services and Efficiency of Manufacturing Firms: Does 'Liberalization' Matter?

Posted by D. Daniel Sokol

Emanuele Forlani, Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) asks Competition in Services and Efficiency of Manufacturing Firms: Does 'Liberalization' Matter?

ABSTRACT: In developed economies, services form an increasing proportion of inputs employed by manufacturing firms. While downstream firms act in a very competitive environment, services often operate in protected or highly regulated markets. In this paper, I empirically investigate whether the degree of competition in services aff ects the efficiency of manufacturing firms through services production inputs. By using both fi rm and sector level data for France, through input-output analysis I show that variations in the upstream competition, especially in network industries, a ffect the average productivity level in manufacturing industry: an increase in average markups is associated with a reduction in manufacturing productivity. The fi ndings di ffer according to firms size and initial efficiency level: in the short run less efficient and small firms are relatively mostly harmed by an uncompetitive service sector.

August 2, 2012 | Permalink | Comments (0) | TrackBack (0)

The Globalization of Antitrust and Competition Law

Posted by D. Daniel Sokol

Eric Engle, Humboldt University of Berlin - Faculty of Law describes The Globalization of Antitrust and Competition Law.

ABSTRACT: Currently, a de facto global antitrust system, constructed on the basis of emulation of the converging U.S.-E.U. anti-trust/competition law regime is anchoring global laws about unfair business practices as to price fixing and production quotas, inter alia. This de facto system is not yet based de jure in the World Trade Organization or any similar parallel institution. This may be due to the fact that there are several competing theoretical rationales which justify antitrust law. These competing rationales often have conflicting assumptions and the rules which they generate in turn reflect those divergences. Nevertheless, outcomes, rules, and even, finally, the various rationales of the globalizing antitrust law are converging. Competing theories of antitrust, early U.S. populism, Marxism, Corporatism, Ordo-Liberalism, and Neo-Liberalism are exposed here so as to determine where there are any theoretical commonalities. This article makes explicit the competing concerns and assumptions underlying globalizing antitrust law. It argues that the common emerging practical threads of thought are: consumer well being as the standard for determining whether a restriction is reasonable; the recognition that although monopoly may be inevitably more productive, monopoly is not inevitably inefficient or unfair; economic analysis, especially quantitative analysis; and possibly also proportionality analysis to resolve uncertainty. The article explains how the various antitrust rules are consequent to competing concerns and presumptions of the different theories. It concludes that a global antitrust law is possible, and indeed inevitable, due to the globalization of trade. Any eventual "World Competition Law Convention" would best result from a well structured theoretical base. This work provides the needed theoretical overview to help the process of history along, so that global society will emerge out of the conflicts of the past and into prosperty. By exposing the competing ideas and the resulting rules it is hoped that norms generated in the first world center norms will be more rapidly and effectively understood, taken up, and implemented by the global periphery, notably the BRIC countries, and then de jure globally e.g. via an OECD model antitrust convention.

August 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Dynamic Product Diversity

Posted by D. Daniel Sokol

Ramon Caminal - Institut d'Analisi Economica explores Dynamic Product Diversity.

ABSTRACT: The goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation. We focus on those types of goods for which consumers purchase at most one unit of each variety, but repeat purchases in the same product category. The model considers infinitely-lived, forward-looking consumers and firms. We show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation. If the latter is sufficiently strong then the rate of introduction of new products is higher than socially desirable (excessive dynamic product diversity).

August 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 1, 2012

Product innovation in a vertically differentiated model

Posted by D. Daniel Sokol

Luigi Filippini (Universita Cattolica del Sacro Cuore) and Cecilia Vergari (University of Bologna) discuss Product innovation in a vertically differentiated model.

ABSTRACT: We study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream firms to improve the quality of their final goods. We consider a general two-part tariff contract for both outside and incumbent innovators. We find that technology diffusion critically depends on the nature of market competition (Cournot vs. Bertrand). Moreover, the vertical merger with either downstream firm is always privately profitable and it is welfare improving for large innovations: this implies that not all profitable mergers should be rejected.

August 1, 2012 | Permalink | Comments (0) | TrackBack (0)

A Cartel that Lasts for Centuries: The Case of the Eastern Orthodox Church Indulgences

Posted by D. Daniel Sokol

Kostas Axarloglou, ALBA Graduate Business School, Christos Cabolis, ALBA Graduate Business School, Yale SOM International Center for Finance and Nikolaos Chrissidis, Southern Connecticut State University have an exicting new paper on A Cartel that Lasts for Centuries: The Case of the Eastern Orthodox Church Indulgences.

ABSTRACT: In this paper, we present a non-conventional case of collusive behavior and tactics that last for centuries. In particular, we focus on the process through which the Patriarchates of the Eastern Orthodox Church (specifically, those of Constantinople, Jerusalem, Antioch, and Alexandria) distributed indulgences to believers in their jurisdictions during the period between the sixteenth and the seventeenth centuries. By employing a wide variety of primary sources such as correspondence among the various patriarchates and among individual clerics, printing orders for indulgences, and income-expenditure records, among others, we present evidence of oligopolistic interaction and behavior among the various Patriarchates in the distribution of indulgences. The observed long-duration of this collusive structure is the outcome of high barriers to entry, well defined market segmentation, effective monitoring, a strong enforcement mechanism and finally no product innovation. Overall, the data suggest that, besides their spiritual importance, indulgences were promoted in a way that resembles very much the distribution method and process of any typical product in a modern market economy.

August 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Settling Cartel Investigations in the EU and its Member States

Posted by D. Daniel Sokol

Mel Marquis, European University Institute, University of Verona discusses Settling Cartel Investigations in the EU and its Member States.

ABSTRACT: The paper discusses the slowly emerging cartel settlement practice of the European Commission and the more rapidly developing practice in certain EU Member States.

August 1, 2012 | Permalink | Comments (0) | TrackBack (0)

From Astra-Zeneca to Pfizer: When Protection of Originators' Patents Ceases to be a "Right" and Becomes an Abuse of Dominance

Posted by D. Daniel Sokol

Stefano Grassani (Pavia e Ansaldo) discusses From Astra-Zeneca to Pfizer: When Protection of Originators' Patents Ceases to be a "Right" and Becomes an Abuse of Dominance.

ABSTRACT: On Jan. 11, 2012, the Italian Antitrust Authority ("IAA") found Pfizer Inc. and its Swedish and Italian subsidiaries guilty of abuse of dominant position pursuant to Article 102 of the Treaty on the Functioning of the European Union. The IAA alleged that these subsidiaries jointly engaged in unlawful exclusionary conducts so as to unlawfully extend IP exclusive rights over Pfizer's Xalatan blockbuster drug, deterring or, in any event, delaying entry of generic competition on the Italian market. A fine in excess of US$ 11 million was levied on Pfizer.

The decision has drawn widespread attention among practitioners and pharma companies, as it questions the antitrust legitimacy of regulatory tactics which may be lawful under IP laws, but could be said to raise obstacles to competitors and, therefore, trigger antitrust scrutiny. It has even been argued that, with this ruling, the IAA has gone considerably further than the already quite pervasive standard of abuse of dominance set by the 2010 EU General Court's judgment in Astra Zeneca.

While I respectfully disagree that the IAA's decision in Pfizer departs from the existing EU case law, it is certainly a very interesting ruling, with far-reaching implications. Moreover, the fact that it was issued by a national competition agency confirms that the decentralization of European antitrust law brought about by Regulation 1 of 2003 is indeed a reality, to the point where national agencies do not refrain from dealing with sensitive and critical matters-such as the interplay between IP and antitrust law-which one would assume the EU Commission would be primarily addressing.

Therefore, notwithstanding the fact that an appeal has been lodged by Pfizer before the Italian lower administrative court, and that a judgment is expected by the end of this year at the latest, the decision of the IAA in and of itself is worth of consideration.

August 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Structuring Medicaid Accountable Care Organizations to Avoid Antitrust Challenges

Posted by D. Daniel Sokol

Tara Adams Ragone, Seton Hall University School of Law, Center for Health & Pharmaceutical Law & Policy has written on Structuring Medicaid Accountable Care Organizations to Avoid Antitrust Challenges.

ABSTRACT: Faced with increasingly inefficient, costly, poor quality, fragmented medical care for their citizens, several states are adopting accountable care organization (“ACO”) models of care delivery to improve access to quality health care while trying to bend the cost curve. ACOs are not one-size fits all delivery systems, however, and states are testing different models to see what works best for their needs. Some States are focusing their efforts on developing Medicaid ACOs, which may “offer a useful framework through which payers, providers, and communities can radically restructure care delivery to improve care for low-income patients and reduce system costs.”

New Jersey is on the forefront of State efforts to develop safety net ACOs to provide essential health care to their most vulnerable populations. On August 18, 2011, New Jersey enacted the Medicaid Accountable Care Organization Demonstration Project. Although this pilot project shares some features with other ACOs developed at the State and national level, it has been described as “unique in its ground-up, community-based approach” pursuant to which a single ACO serves a defined geographic area. While this approach brings the community together to address entrenched, systemic fragmentation, the degree of market share and collaboration among potential competitors raises antitrust concerns.

This Article explores two possible responses to these antitrust concerns, clinical integration and the state action doctrine. New Jersey is presently drafting regulations to implement its demonstration project. By structuring Medicaid ACOs to reflect these doctrines, the State should be able to mitigate anticompetitive threats and avoid Federal antitrust liability. Failure to do so, however, could jeopardize the success of the pilot because providers are less inclined to seek to form an ACO if they face potential or even uncertain antitrust liability. ACOs and antitrust regulation share the common goals of controlling costs while improving quality, and thus New Jersey should be able to be harmonize its pilot with antitrust principles.

August 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 31, 2012

How Much Do Cartels Typically Overcharge?

Posted by D. Daniel Sokol

Marcel Boyer, University of Montreal - Department of Economics, Center for Interuniversity Research and Analysis on Organization (CIRANO) and Rachidi Kotchoni, University of Alberta - Economic Department ask How Much Do Cartels Typically Overcharge?

ABSTRACT: The estimation of cartel overcharges lie at the heart of antitrust policy on cartel prosecution as it constitutes a basic element in the determination of fines. Connor and Lande (2008) conducted a survey of cartels and found a mean overcharge estimates in the range of 31% to 49%. By examining more sources, Connor (2010) finds a mean of 50.4% for successful cartels. However, the data used in those studies are estimates obtained in different ways, sources and contexts rather direct observations. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear regression model to the data without providing a carefull treatment of the problems raised above may produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006) while providing a sound treatment of those matters. We find typical bias-corrected mean and median overcharge estimates of 13.62% and 13.63% for cartels with initial overcharge estimates lying between 0% and 50% and bias-corrected mean and median overcharges estimates of 17.52% and 14.05% for the whole sample. Clearly, our results have significant antitrust policy implications.

July 31, 2012 | Permalink | Comments (0) | TrackBack (0)

The Competitive Effects of Firm Exit - Evidence from the U.S. Airline Industry

Posted by D. Daniel Sokol

Kai Huschelrath, Centre for European Economic Research (ZEW) and Kathrin Mueller, Centre for European Economic Research (ZEW) discuss The Competitive Effects of Firm Exit - Evidence from the U.S. Airline Industry.

ABSTRACT: We study the competitive effects of five liquidations and six mergers in the domestic U.S. airline industry between 1995 and 2010. Applying fixed effects regression models we find that route exits due to liquidation lead to substantially larger price increases than merger-related exits. Within the merger category, our analysis reveals significant price increases on all affected routes immediately after the exit events. In the medium and long-run, however, realized merger efficiencies and entry-inducing effects are found to be strong enough to drive prices down to pre-exit levels.

July 31, 2012 | Permalink | Comments (0) | TrackBack (0)

Quality Competition and a Demand Spillover Effect: A Case of Product Differentiated Duopoly

Posted by D. Daniel Sokol

Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) explores Quality Competition and a Demand Spillover Effect: A Case of Product Differentiated Duopoly.

ABSTRACT: Employing the price-quality competition model in a horizontally differentiated products market, we analyze how a demand spillover effect associated with upgrading the quality level of a product affects the strategic relationship between firms and the property of a subgame perfect Nash equilibrium. In particular, we show that the strategic relationship depends on the degree of a demand spillover effect. Then, we consider the cases of second-best policy and cooperative quality choice. Furthermore, we illustrate that there exists a natural Stackelberg equilibrium under asymmetric demand spillover effects that is Pareto superior to other equilibria. Finally, we examine an optimal policy with international R&D rivalry.

July 31, 2012 | Permalink | Comments (0) | TrackBack (0)

Identity, Invention, and the Culture of Personalized Medicine Patenting

Posted by D. Daniel Sokol

Shubha Ghosh (Wisconsin) has a new book on Identity, Invention, and the Culture of Personalized Medicine Patenting.

BOOK ABSTRACT: What are the normative implications of patenting in the area of personalized medicine? As patents on genes and medical diagnoses have increased over the past decade, this question lies at the intersection of intellectual property theory, identity politics, biomedical ethics, and constitutional law. These patents are part of the personalized medicine industry, which develops medical treatments tailored to individuals based on race and other characteristics. This book provides an overview of developments in personalized medicine patenting and suggests policies to best regulate such patents.

Download GhoshCUPflyer

July 31, 2012 | Permalink | Comments (0) | TrackBack (0)