Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Wednesday, September 5, 2012

The Contribution of Innovation to Health Care Costs: At Least 50%?

Posted by D. Daniel Sokol

Rosa Abrantes-Metz (Global Economics Group, NYU) asks The Contribution of Innovation to Health Care Costs: At Least 50%?

ABSTRACT: This paper is primarily concerned with estimating an upper bound for the contribution of technological progress on health care costs as motivated by the recent debate on U.S. health care reform. We critically address whether technology is at least 50% of the increase in health care costs as proposed recently in the literature. The desire to reduce costs in the health care system combined with estimates that technological change is the major contributor to those costs has led some to propose policies with the ultimate effect of discouraging innovation in health care technology. In this paper we show that more appropriate econometric procedures lead to estimates of technology’s role in health care costs which are significantly less than other published results.

Using only U.S. time-series data we estimate an upper bound for the contribution of innovation to health care costs. Our model follows that of the Congressional Budget Office’s (CBO) 2008 report and uses identical data, but finds that the contribution of technological progress is 32.3% – significantly smaller than what the CBO estimates. Even this value can only represent an upper bound, as there remain important factors which have been omitted from the study primarily due to data unavailability.

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

Tuesday, September 4, 2012

Fifth Annual Searle Center Conference on Antitrust Economics and Competition Policy Friday, September 21 - Saturday, September 22, 2012

Posted by D. Daniel Sokol

Fifth Annual Searle Center Conference on Antitrust Economics and Competition Policy


Friday, September 21 - Saturday, September 22, 2012

The Fifth Annual Searle Center Conference on Antitrust Economics and Competition Policy will be held, September 21-22, 2012.

The goal of this conferecne is to provide a forum where leading scholars from across the country can gather together with Northwestern's own distinguished faculty to present and discuss high quality research relevant to antitrust economics and competition policy.

The conference is co-sponsored by the Searle Center on Law, Regulation, and Economic Growth and the Center for the Study of Industrial Organization at Northwestern University.

Registration | Papers | Agenda

PAPERS

A  Computational Model of Merger Policy (with  Volker Nocke)
Mark Satterthewaite, A.C. Buehler Professor in Hospital &  Health Services Management; Professor of Strategic Management & Managerial  Economics, Kellogg School of Management, Northwestern University
Michael  Whinston, Robert E. and  Emily H. King Professor of Business Institutions and Co-director of the Center  for the Study of Industrial Organization, Department of Economics, Northwestern  University

Vertical  Mergers and Bargaining Strength
William P. Rogerson, Harold and Virginia Anderson Professor and  Department Chair, Department of Economics, Northwestern University

A More General Theory of Commodity Bundling
Mark Armstrong, Department of  Economics, Oxford University

Vertical Integration,  Foreclosure and Multilateral Relations (with Patrick Rey)
Volcker Nocke, University of Mannheim, Department of  Economics

Vertical  Integration With Complementary Inputs(with Markus Reisinger)
Emanuele Tarantino, University of Bologna, Department of  Economics

A  Dynamic Model of Predation (with  Roy Shalem and Konrad Stahl)
Yossi Speigel, Faculty of Management, Recanati Graduate  School of Business Administration, Tel Aviv University

Tying and Bundling in  a Nearly Contestable Market
Michael Salinger, Jacqueline J. and Arthur S. Bahr Professor  in Management, Boston University School of Management

The  Agency and Wholesale Models in Electronic Content Markets
Justin P. Johnson, Samuel Curtis Johnson Graduate School of  Management, Cornell University

REGISTRATION

Attendance at the symposium is by invitation only. To request an invitation, please send an email with your complete professional contact information including title and affiliation to d-gundersen@law.northwestern.edu.

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

Outreach Activities of the JFTC

Posted by D. Daniel Sokol

The Japan Fair Trade Commission describes Outreach Activities of the JFTC.

ABSTRACT: As in the case of any policy, unless the society, including government bodies, understands why a policy is established and implemented, how it is used, and what kind of advantages can be obtained, the policy won't go anywhere. Therefore, the success of any policy depends on how the government body responsible for the policy "advertises" it. (This kind of advertising activity is referred to as "outreach activity" in this paper.) Especially for competition policy, which maintains and promotes fair and free competition in the market, it may take time for the society to understand both its advantages and benefits. So the outreach activities of the government body responsible for a competition policy are important and essential for the policy to work well.

In this paper, we would like to explain three types of the outreach activities the Japan Fair Trade Commission (hereinafter referred to as "JFTC")-the government body responsible for the competition policy in Japan-uses for enterprises, government bodies, and the general public.

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

And the Bands Played on: Digital Disintermediation and the Quality of New Recorded Music

Posted by D. Daniel Sokol

Joel Waldfogel, University of Minnesota has a really interesting paper, And the Bands Played on: Digital Disintermediation and the Quality of New Recorded Music.

ABSTRACT: Although revenue for recorded music has collapsed since the explosion of file sharing, results elsewhere suggest that the quality of new music has not suffered. One possible explanation is that digitization has allowed a wider range of firms to bring far more music to market using lower-cost methods of production, distribution, and promotion. Record labels have traditionally found it difficult to predict which albums will find commercial success, so many released albums fail while many nascent but unreleased albums might have been successful. Forces raising the number of products released may allow consumers to discover more appealing choices if they can sift through the offerings. Digitization has promoted both Internet radio and a growing cadre of online music reviewers, providing alternatives to radio airplay as means for new product discovery. To explore this, I assemble data on new works of recorded music released between 1980 and 2010, along with data on particular albums’ sales, airplay on both traditional and Internet radio, and album reviews at Metacritic since 2000. First, I document that despite a substantial drop in major-label album releases, the total quantity of new albums released annually has increased sharply since 2000, driven by independent labels and purely digital products. Second, increased product availability has been accompanied by a reduction in the concentration of sales in the top albums. Third, new information channels – Internet radio and online criticism – change the number and kinds of products about which consumers have information. Fourth, in the past dozen years, increasing numbers of albums find commercial success without substantial traditional airplay. Finally, albums from independent labels – which previously might not have made it to market – account for a growing share of commercially successful albums.

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

Procedural and Institutional Norms in Antitrust Enforcement: The U.S. System

Posted by D. Daniel Sokol

Harry First, New York University (NYU) - School of Law, Eleanor M. Fox, New York University School of Law and Daniel E. Hemli, Bracewell & Giuliani LLP have a new book chapter on Procedural and Institutional Norms in Antitrust Enforcement: The U.S. System.

ABSTRACT: The purpose of this paper is to describe the institutions of antitrust enforcement in the United States and to test those institutions against a set of norms used to assess the operations of administrative agencies. The paper is part of a broader project studying global administrative agencies.

The paper begins with a short review of the statutory structure of the U.S. antitrust system (federal, state, and private) and a more in-depth description of the institutional structure of antitrust enforcement in the United States, including the interaction between U.S. and non-U.S. enforcement agencies. The second part of the paper examines the performance of the two federal enforcement agencies (the Justice Department Antitrust Division and the Federal Trade Commission) in two general areas, case-by-case decision-making and institutional performance. Within the case-by-case category, the paper reviews three aspects of the process — the decision to proceed, adjudication, and appeals — and two broad due process norms relevant to individual case decision-making — non-discrimination and proportionality of remedies. Within the institutional performance category, the paper reviews five broad norms — operational efficiency, expertise, transparency, accountability, and the rule of law. With regard to each of these ten areas, the paper describes and assesses the two antitrust agencies separately.

The paper concludes that the U.S. antitrust enforcement system measures up well in terms of the due process and institutional performance norms that are the focus of the study. Although major structural changes in the system appear to be both unnecessary and unlikely, the paper suggests some incremental changes to increase transparency and accountability throughout the decision-making process.

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

What drives fraud in a credence goods market? - Evidence from a field experiment

Posted by D. Daniel Sokol

Alexander Rasch (University of Cologne) and Christian Waibel (CGS, University of Cologne) ask What drives fraud in a credence goods market? - Evidence from a field experiment.

ABSTRACT: This paper investigates the impact of four key economic variables on an expert firm's incentive to defraud its customers in a credence goods market: the level of competition, the expert firm's financial situation, its competence, and its reputational concerns. We use and complement the dataset of a nationwide field experiment conducted by the German Automobile Association that regularly checks the reliability of garages in Germany. We find that more intense competition and high competence lower firms' incentive to overcharge. A low concern for reputation and a critical financial situation increase the incentive to overcharge.

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

International Regulatory Cooperation — Washington, DC, March 21, 2013

Posted by D. Daniel Sokol

The Administrative Law Review and the United States Chamber of Commerce will co-host a symposium related to International Regulatory Cooperation March 21, 2013, at the United States Chamber of Commerce Building. The submission deadline for presenting a paper at the symposium is Oct. 31, 2012. The submission deadline for the published symposium is Dec. 15, 2012.

The topic of the symposium relates to cooperation amongst United States agencies and their overseas counterparts, which has received significant
attention in recent months in light of the issuance of Executive Order 13609, Administrative Conference Recommendation 2011-6, and an ABA resolutionurging regulatory cooperation with relevant foreign authorities.The symposium seeks to explore the theoretical issues underlying the international harmonization of regulatory approaches and cooperation between United States agencies and their overseas counterparts. Potential topics include:

  • A comparative analysis of the principles underlying the regulatory systems of the United States, European Union, and other nations
  • An examination of legal barriers that preclude United States agencies from pursuing international regulatory cooperation
  • How multilateral or bilateral international obligations (e.g. regulations and oversight related to financial instruments or accounting practices) will facilitate/hinder cooperation efforts
  • Any other topic that bears upon international coordination amongst agencies

The Administrative Law Review will accept both proposals for presentations at the March 2013 symposium and articles for publication in the law journal. Scholars may submit a presentation topic without a related journal article or submit a journal article without speaking at the symposium, and selection of a presentation proposal does not guarantee publication of any
associated article.

Symposium presentation proposals should consist of a 3-5 page outline of the proposed presentation and must be submitted by October 31, 2012, for consideration. Articles must be submitted by December 15, 2012 to be considered for publication in the June 2013 issue
of the Administrative Law Review. Scholars interested both in participating in the symposium and submitting an associated article may submit the article in lieu of a formal presentation outline.

Should you have any questions about the symposium, please do not hesitate to contact Erica Lynn Tokar (alr.sse@wcl.american.edu), the Administrative Law Review’s Symposium Editor, or Adam Schlosser (aschlosser@uschamber.com), who is coordinating the event on behalf of the Chamber of Commerce. If you have any questions related to publication in the Administrative Law Review, please contact Editor-in-Chief Melissa Lim (alr.eic@wcl.american.edu).

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

The Theory of Endogenous Market Structures: A Survey

Posted by D. Daniel Sokol

Federico Etro (Department of Economics, University Of Venice Ca Foscari) offers The Theory of Endogenous Market Structures: A Survey.

ABSTRACT: I characterize microfounded endogenous market structures with Bertrand and Cournot competition and perform welfare analysis generalizing the Mankiw-Whinston condition for excess entry. The impact of market leaders on welfare is reconsidered, with a number of policy implications about strategic investments, vertical contracts, bundling, mergers and more. The neutrality of consumer surplus holds only when utility is homothetic. Under quantity competition, aggressive (accommodating) leaders increase consumer surplus if the elasticity of utility is decreasing (increasing) in consumption. This provides general rules to evaluate mergers and abuse of dominance issues in antitrust policy.

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

Monday, September 3, 2012

On the Price Effects of Horizontal Mergers: A Theoretical Interpretation

Posted by D. Daniel Sokol

Emilie Dargaud, French National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE), Université de la Réunion, University of Lyon 2 and Carlo Reggiani write On the Price Effects of Horizontal Mergers: A Theoretical Interpretation.

ABSTRACT: Horizontal mergers are usually under the scrutiny of antitrust authorities due to their potential undesirable effects on prices and consumer surplus. Ex-post evidence, however, suggests that not always these effects take place and even relevant mergers may end up having negligible price effects. The analysis of mergers in the context of non-localized spatial competition may offer a further interpretation to the ones proposed in the literature: in this framework both positive and zero price effects are possible outcomes of the merger activity.

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

Upward Pricing Pressure in Two-Sided Markets

Posted by D. Daniel Sokol

Pauline Affeldt, Lapo Filistrucchi, Department of Economics, CentER & TILEC, Tilburg University, Dipertimento di Scienze Economiche, University of Florence and Tobias J. Klein, Tilburg University - Department of Econometrics & Operations Research, discuss Upward Pricing Pressure in Two-Sided Markets.

ABSTRACT: Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.

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

Competition Policy of the Russian Federation: How and Why Misunderstanding Economics Threatens the Competitiveness of the Sector

Posted by D. Daniel Sokol

Svetlana Avdasheva & Andrei Shastitko (Higher School of Economics, National Research University (Moscow) & Moscow Lomonosov State University (Moscow) explore Competition Policy of the Russian Federation: How and Why Misunderstanding Economics Threatens the Competitiveness of the Sector.

ABSTRACT: The Law 'On Trade,' adopted in the Russian Federation at the end of 2009, introduced a set of rules that regulate the terms of contracts between food suppliers and retail chains. The legal requirements are very different to any regulations employed in other countries (including the Grocery Supply Code of Practice but, at the same time, they use many concepts developed by economics and expressed both in competition policy and antitrust legislation. The new rules are being actively enforced by the Russian competition agency and provide a significant impact on contracting practices in retailing. At the same time results of many surveys as well as expert estimates show that the proclaimed goal of the law-that is, the redistribution of surplus in the supplier-retailer relationship in favor of the supplier-has not been achieved. Without discussing in detail the possibility of achieving the desired state of affairs in the contractual relationships in retailing we concentrate on one of the possible explanations for market participants' dissatisfaction with the results of the law's implementation. The law's requirements are based on assuming that terms and conditions common in retailer-supplier contracts, such as discounts, slotting allowances, and marketing fees, as well as variations in contract terms between suppliers, represent an abuse of bargaining power by retail chains that should be illegal. We develop a theoretical framework to show how restrictions on contract terms not only generate an excessive administrative burden on market participants but also undermine a successful cooperation between suppliers and retailers.

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