Antitrust & Competition Policy Blog

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

Friday, December 14, 2012

e-Book Platform Competition in the Presence of Two-Sided Network Externalities

Posted by D. Daniel Sokol

Yabing Jiang (Lutgert College of Business, Florida Gulf Coast University) discusses e-Book Platform Competition in the Presence of Two-Sided Network Externalities.

ABSTRACT: The success of the Kindle e-book platform and the increased popularity of e-books among members of the reading community have attracted extensive interest in the high-tech industry. New platform providers are jumping in the market to compete for device and e-book sales. In this paper, we model the direct competition in the e-book platform market through a two-sided network externality model. We show that publishers can influence consumers’ e-book platform adoption decisions and the total e-book sales by strategically deciding the size of contents available on each platform.

December 14, 2012 | Permalink | Comments (0) | TrackBack (0)

The scam busters: How antitrust economists are getting better at spotting cartels

Posted by D. Daniel Sokol

The Economist has a great article this week about screening for cartels. It highlights the work of my co-author Rosa (Romy) Abrantes-Metz on Libor. Go Romy!

December 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Dysfunctions of the patent system and their effects on competition

Posted by D. Daniel Sokol

David Encaoua (Universite Paris I - Pantheon Sorbonne) and Thierry Madies (University of Fribourg) explore Dysfunctions of the patent system and their effects on competition.

ABSTRACT: In this paper the authors argue that the contemporary tensions between patents and competition no longer reside in the traditional trade-off between the exclusionary right given to an inventor to encourage innovation, and the welfare loss induced by the market power associated to this right. They rather consider that the three following distortions of the patent system create important conflicts between patents and competition on the product market, the technology market, and the innovation market. The first distortion concerns the existence of dubious or weak patents. Too many patents are granted to applications of bad quality, in terms of the usual patentability criteria. This increases the uncertainty attached to patents, reduces the credibility of the system and calls into question the justification of the patent as a protective mechanism. Second, the configuration of a patent, originally designed in the context of an isolated innovation, is not adapted to the context of sequential or intergenerational innovations, in which an innovation relies on earlier patented inventions. Even though sequential innovation calls for fine delimitations between successive generations of innovators, the strengthening of intellectual property, including the extension of the patentable subject matters opened the door to opportunistic behavior and adversely affected the needed flexibility to favor technological exchanges. Third, the emergence of complex technologies, in which the use of a large number of fragmented patents is necessary to produce a new product, implies the necessity to coordinate the various patent holders' behavior. The potential entrants in these complex technologies are struck by the coordinated behavior of the patent holders, and this is illustrated in different settings such as the pooling of complementary patents and the licensing of essential patents by the members of a Standard Se! tting Organization. Very often, patents serve to create ambushes or to capture unjustified rents through excessive license fees, which in turn create barriers to entry for new competitors in the innovation market. Two important consequences of these distorsions are derived. On the one hand, the resolution of these conflicts cannot rely exclusively on the application of the antitrust law. Even if these distortions seriously affect competition in the three markets of products, technology and innovation, antitrust rules are unable to resolve the specific effects rose from distortions of the contemporary patent system. On the other hand, the existence of these distortions leads to a very expensive judicial implementation of the patent system. The multiplication of the conflicts due to a strategic use of patents, particularly in the information and communication technology, in biotechnology and medicine raises the question of the adaptation of the legal status of patents to the contemporary technological developments.

December 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Price as a signal of product quality: some experimental evidence

Posted by D. Daniel Sokol

Giovanni Mastrobuoni Franco Peracchi Aleksey Tetenov describe Price as a signal of product quality: some experimental evidence.

ABSTRACT: We study the determinants of the choice between wines in wine tasting experiments where about 200 nonprofessional tasters were asked to indicate which one of the tasted wines they preferred and which one they would buy. In addition to actually tasting several wines, which differ in terms of their intrinsic quality, tasters were randomly given fictitious information about their price and the environment where the grapes were grown and the wines produced. We exploit the randomness of these signals to weigh their importance relative to the intrinsic quality of the wine using a random utility model. The model combines separate information on which wine the tasters prefer and which one they would buy to identify the signaling value of price. We are able to separate the positive signaling effect of price from its negative effect through the budget constraint. Consistent with Wolinsky (1983) and Milgrom and Roberts (1986), we f! ind that tasters use price as a signal about the quality of the product. The signaling effect is strongly non-linear and depends on the tasters' experience.

December 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 13, 2012

Market Structure and Pass-Through

Posted by D. Daniel Sokol

Raphael Schoenle (Brandeis University) and Raphael Auer (Swiss National Bank) have a new paper on Market Structure and Pass-Through.

ABSTRACT: In this paper, we examine the extent to which market structure and the way in which it affects pricing decisions of profit-maximizing firms can explain incomplete exchange rate pass-through. To this purpose, we evaluate how pass-through rates vary across trade partners and sectors depending on the mass of firms affected by a particular exchange rate shock and the distribution of firms' market shares in the sector. In the first step of our analysis, we decompose bilateral exchange rate movements into broad US Dollar (USD) movements and trade-partner currency (TPC) movements. Using micro data on US import prices, we show that the pass-through rate following USD movements is up to four times as large as the pass-through rate following TPC movements. Second, we show that the rate of pass-through following TPC movements is increasing in the trade partner's sector-specific market share, while the USD pass-through rate is decre! asing in the market share of domestic producers. In the third step, we draw on the parsimonious model of oligopoly pricing featuring variable markups of Dornbusch (1987) and Atkeson and Burstein (2008) to show how the distribution of firms' market shares within a sector affects the trade-partner specific TPC pass-through rate. We calibrate this model using our exchange rate decomposition and information on the origin of firms and their market shares. We find that the calibrated model can explain a substantial part of the variation in import price adjustments and pass-through rates across sectors, trade partners, and sector-trade partner pairs.

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Price Discrimination of Congestible Network Goods

Posted by D. Daniel Sokol

Maxime Agbo (Agrocampus Ouest), Marc Santugini (HEC Montreal) and Jonathan W. Williams (University of Georgia) address Price Discrimination of Congestible Network Goods.

ABSTRACT: We study second-degree price discrimination for a congestible network good. We show that the seller does not always provide distinct contracts (i.e., it is not always optimal to price discriminate) and that it is more likely for the low-valuation buyer to be excluded. Because of the network externality through congestion, no buyer receives an efficient allocation. In particular, the high-valuation buyer might be offered a higher or a lower quality (relative to the first-degree price discrimination offer). Moreover, with congestion and for values of the parameters for which all types are serviced, consumer surplus under second-degree price discrimination may be greater than consumer surplus under no price discrimination.

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Price Competition in a Duopoly Characterized by Positional Effects

Posted by D. Daniel Sokol

Evdokia Dritsa (Department of Economics, Athens University of Economics and Business) and Eleftherios Zacharias (Department of Economics, Athens University of Economics and Business) discuss Price Competition in a Duopoly Characterized by Positional Effects.

ABSTRACT: We examine the price decisions in a vertically differentiated duopoly where the decision to buy a good depends not only upon the intrinsic utility from consuming it but also upon the social attributes (prestige, uniqueness etc.) associated with its consumption. These social attributes are especially important in vertically differentiated markets. We show that when these attributes are not very strong, if their intensity increases, the profits of both firms increase. However, when these attributes are very important, if their intensity increases, the profits of the firm that offers a lower quality variant increase whereas the profits of the firm that offers the higher quality variant decrease. Our results have implications on the amount of persuasive advertising firms should conduct in such markets.

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Geradin and Friends Relaunch the Antitrust Hotch Potch

Posted by D. Daniel Sokol

The Antitrust Hotch Potch is back.

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

13th GCR 100 is now out

2013 St.Gallen International Competition Law Forum ICF

Posted by D. Daniel Sokol

Programme 2013

Thursday, April 4th 2013

08:45 Welcome Carl Baudenbacher
09:00 Sven Norberg presiding
Topic of the Commissioner’s choice (including history of EU-Swiss relations)
Joaquin Almunia
10:15 Coffee break  
10:45 Ingeborg Simonsson presiding
Digital evidence gathering in dawn raids
 Maria Jaspers
Romina Polley
12:00 Lunch  
13:30 Patrick Sommer presiding
Joint ventures in antitrust – a family affair?
James Flynn
Katharina Krauss
14:45 Joachim Bornkamm presiding
Economic analysis, legal certainty and judicial review
Stefan Bühler
16:00 Coffee break
16:30 John Temple Lang presiding
How should competition law be applied in a recession?
Javier Ruiz Calzado
Roger Witcomb
17:45 End  
19:30 Dinner with special event  


Friday, April 5th 2013

09:00 Jürg Borer and Peter Freeman presiding
Presidents’ breakfast: Hot topics in France, Germany, Italy and Switzerland
Bruno Lasserre
Vincent Martenet
Andreas Mundt
Giovanni Pitruzzella (t.b.c.)
10:30 Coffee break  
11:00 Astrid Waser presiding
International cooperation between competition authorities
Patrik Ducrey
Bill Kovacic
Carles Esteva Mosso
12:30 Lunch  
14:00 Ingo Brinker presiding
Oligopolies and structural remedies
Frank Montag
Thibaud Verge
15:00 Franz Hoffet presiding
Verticals: Do national differences warrant different regulatory approaches?
Reto Jacobs
Kai-Uwe Kuhn
16:00 Coffee break  
16:30 Rolf Weber presiding
Competition law issues in the online world

Thomas Hoeren
17:15 Closing remarks Carl Baudenbacher

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Evaluating antitrust leniency programs

Posted by D. Daniel Sokol

Joan Ramon Borrell (Universitat de Barcelona), Juan Luis Jimenez (Universidad de Las Palmas de Gran Canaria) and Carmen Garcia (Universidad Carlos III and Universidad de Las Palmas de Gran Canaria) are Evaluating antitrust leniency programs.

ABSTRACT: This paper identifies and then quantifies econometrically the impact of leniency programs on the perception of the effectiveness of antitrust policies in the business community using panel data for as much as 59 countries and 14-year span. We use the dynamics of the gradual diffusion of leniency programs across countries and over time to evaluate the impact of the program, taking care of the bias caused by self-selection into the program. We find that leniency programs increase the perception of effectiveness by an order of magnitude ranging from 10% to 21%. Leniency programs have become weapons of mass dissuasion in the hands of antitrust enforcers against the more damaging forms of explicit collusion among rival firms in the market place.

December 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 12, 2012

Google and Antitrust

Posted by D. Daniel Sokol

At the upcoming AALS meeting, the Antitrust and Economic Regulation Section will host a roundtable on the topic “Google and Antitrust.” Participants Marina Lao, Geoff Manne, Frank Pasquale, Pam Samuelson, and Mark Patterson will discuss Google Book Search and the potential FTC case against Google. The session will be on Saturday, January 5, from 10:30 to 12:15 in the Hilton New Orleans Riverside (Newberry, Third Floor).

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Are Bar Associations Anticompetitive? An Empirical Analysis of Recommended Prices for Legal Services in Spain

Posted by D. Daniel Sokol

Aitor Ciarreta (Universidad del Pais Vasco), Maria Paz Espinosa (Universidad del Pais Vasco) and Aitor Zurimendi (Universidad del Pais Vasco) ask Are Bar Associations Anticompetitive? An Empirical Analysis of Recommended Prices for Legal Services in Spain.

ABSTRACT: The European Commission Report on Competition in Professional Services found that recommended prices by professional bodies have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. Professional associations argue, first, that a fee schedule may help their members to properly calculate the cost of services avoiding excessive charges and reducing consumers' searching costs and, second, that recommended prices are very useful for cost appraisal if a litigant is condemned to pay the legal expenses of the opposing party. Thus, recommended fee schedules could be justified to some extent if they represented the cost of providing the services. We test this hypothesis using cross-section data on a subset of recommended prices by 52 Spanish bar associations and cost data on their territorial jurisdictions. Our empirical results indicate that prices recommended by bar associations are unrelated to the cost of legal services and therefore we conclude that recommended prices have merely an anticompetitive effect.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Sales and Firm Entry: The Case of Wal-Mart

Posted by D. Daniel Sokol

PJ Glandon (Department of Economics, Colgate University) and Matthew Jaremski (Department of Economics, Colgate University) discuss Sales and Firm Entry: The Case of Wal-Mart. ABSTRACT: Temporary price reductions or sales have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal-Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss-leader strategy.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Monopoly Pricing in the Presence of Social Learning

Posted by D. Daniel Sokol

Bar Ifrach (Management Science and Engineering, Stanford University), Costis Maglaras (Columbia Business School, Columbia University) and Marco Scarsini (Dipartimento di Economia e Finanza, LUISS) explore Monopoly Pricing in the Presence of Social Learning.

ABSTRACT: A monopolist offers a product to a market of consumers with heterogeneous quality preferences. Although initially uninformed about the product quality, they learn by observing past purchase decisions and reviews of other consumers. Our goal is to analyze the social learning mechanism and its effect on the seller's pricing decision. Consumers follow an intuitive non-Bayesian decision rule and, under some conditions, eventually learn the product's quality. We show how the learning trajectory can be approximated in settings with high demand intensity via a mean-field approximation that highlights the dynamics of this learning process, its dependence on the price, and the market heterogeneity with respect to quality preferences. Two pricing policies are studied: a static price, and one with a single price change. Finally, numerical experiments suggest that pricing policies that account for social learning may increase revenues considerably relative to policies that do not.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Call for Papers: Fourth Workshop for Junior Researchers on the Law and Economics of Intellectual Property and Competition - June 10 to June 12, 2013

Posted by D. Daniel Sokol

Fourth Workshop for Junior Researchers on the Law and Economics of Intellectual Property and Competition

From June 10 to June 12, 2013, the International Max Planck Research School for Competition and Innovation ( and the Center for Law & Economics at ETH Zurich ( will jointly organize their Fourth Workshop for Junior Researchers on the Law and Economics of Intellectual Property and Competition Law.

OVERVIEW: The workshop will enable a small number of junior researchers from law and from economics to engage in an intensive, rigorous discussion of their own scholarly work. Several senior professors from law and from economics departments in Europe and the United States will provide feedback on the research projects. Keynote speakers & commentators include faculty of both hosting institutions as well as Professors Ariel Katz (University of Toronto), Mark Lemley (Stanford University), Mark McCabe (University of Michigan/SKEMA Business School, France), Geertrui Van Overwalle (Universities of Leuven & Tilburg), and Joel Waldfogel (University of Minnesota). The workshop will be held at Castle Ringberg (, which is located in a lovely region one hour south of Munich, Germany. The organizers will fund travel and hotel expenses for all invited workshop participants.

PAPER SUBMISSION PROCEDURE: Excellent junior researchers (doctoral students, postdocs, research fellows and assistant professors) from law and from economics are invited to submit their application online at

FURTHER INFORMATION: Further information is available at Any questions concerning the workshop should be directed to Prof. Stefan Bechtold,

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Strategic Delegation Improves Cartel Stability

Posted by D. Daniel Sokol Martijn A. Han (Humboldt University) claims Strategic Delegation Improves Cartel Stability. ABSTRACT: Fershtman and Judd (1987) and Sklivas (1987) show that strategic delegation reduces firm profits in the one-shot Cournot game. Allowing for infinitely repeated interaction, strategic delegation can increase firm profits as it improves cartel stability.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 11, 2012

Competition Policy And Regional Integration In Developing Countries

Posted by D. Daniel Sokol

Josef Drexl, Max Planck Institute for Intellectual Property and Competition Law, Mor Bakhoum, Max Planck Institute for Intellectual Property and Competition Law, Eleanor M. Fox, New York University School of Law, Michal S. Gal, University of Haifa School of Lawand David J. Gerber, Chicago-Kent College of Law are editors of Competition Policy And Regional Integration In Developing Countries.

BOOK ABSTRACT: The book provides insights on the regional integration experiences in developing countries, their potential for development and the role of competition law and policy in the process. Moreover, the book emphasizes the development dimension both of regional competition policies and of competition law. This timely book delivers concrete proposals that will help to unleash the potential of regional integration and regional competition policies, and also help developing countries to fully enjoy the benefits deriving from a regional market.

Mor Bakhoum

1. The Harmonization of ASEAN: Competition Laws and Policy from an Economic Integration Perspective
Lawan Thanadsillapakul

2. Competition Law and Policy in the Framework of ASEAN
Anthony Amunategui Abad

3. Southern African Development Community (SADC) Regional Competition Policy
Gladmore Mamhare

4. Competition Policy in SADC: A South African Perspective
Kasturi Moodaliyar

5. Institutional Coherence and Effectiveness of a Regional Competition Policy: The Case of the West African Economic and Monetary Union (WAEMU)
Mor Bakhoum and Julia Molestina

6. Regional Integration and Competition Policy in the Economic Community of West African States (ECOWAS) Region
Mbissane Ngom

7. Andean Competition Law: Looking for the Private Sector, or the Quest for the Missing Link in Antitrust
Javier Cortázar

8. Regional Integration in the Caribbean: The Role of Competition Policy
Taimoon Stewart

9. Implementing Effective Competition Policy through Regional Trade Agreements: The Case of CARICOM
Delroy S. Beckford

10. The COMESA Regional Competition Regulations
George K. Lipimile

11. Economic Integration and Competition Law in Developing Countries
Josef Drexl

12. Regionalization, Development and Competition Law: Exploring the Political Dimension
David J. Gerber

13. Competition, Development and Regional Integration: In Search of a Competition Law Fit for Developing Countries
Eleanor M. Fox

14. Regional Agreements of Developing Jurisdictions: Unleashing the Potential
Michal S. Gal and Inbal Faibish Wassmer

December 11, 2012 | Permalink | Comments (0) | TrackBack (0)

New Competition Jurisdictions: Shaping Policies and Building Institutions

Posted by D. Daniel Sokol

Richard Whish and Christopher Townley, both King’s College Dickson Poon School of Law have edited New Competition Jurisdictions: Shaping Policies and Building Institutions.

BOOK ABSTRACT: This book focuses on the problems faced by newly-established competition authorities, and on shaping policies and building institutions in those jurisdictions. In particular four key issues encountered by new competition jurisdictions are considered, namely: the challenges and obstacles to adopting competition laws; institutional challenges and choices, with a specific focus on deterrence; the global perspective, with a specific focus on mergers; and a discussion of how to help young academics in new jurisdictions. Theoretical analysis is informed by practice throughout, and in particular by those considered to be at the cutting edge, either working in new competition authorities or from specialists advising them on a daily basis (such as those in the OECD and UNCTAD).

Christopher Townley and Richard Whish

1. HSR at 35: The Early US Premerger Notification Experience and its Meaning for New Systems of Competition Law
William E. Kovacic

David Lewis (Chair)

2. Designing Competition Laws in New Jurisdictions: Three Models to Follow
Heba Shahein

3. The Political Economy of Competition Law Reform in New Jurisdictions
Michelle Chowdhury

4. The Dynamics of Competition Policies in Small Developing Economies: The Central American Countries’ Experience
Claudia Schatan

Commentary on Part One Chapters
Ulla Schwager

Michal S. Gal (Chair)

5. Increasing Deterrence in Latin American Competition Law Enforcement Regimes
Javier Tapia

6. Deterrence and Compensation in New Competition Regimes: The Role of Private Enforcement
Clifford A. Jones

7. Enforcement Priorities for New Agencies: Lessons from South Africa on the Deterrence of Cartel Conduct
Keith Weeks

Commentary on Part Two Chapters
John Davies

David J. Gerber (Chair)

8. Does Implementation of Merger Regulation Impede Inbound Cross-border Mergers? Analysis of Developed versus Developing Countries
Manish Agarwal

9. The Impact of Multi-Jurisdictional Concentrations on the New Competition Law Jurisdictions: A Case Study on Brazil
Marco Botta

Christopher Townley, Heba Shahein and Richard Whish

December 11, 2012 | Permalink | Comments (0) | TrackBack (0)

The Lie in LIBOR: Seeds of a Cartel?

Posted by D. Daniel Sokol

Lianne Craig, Rodger Burnett, & Gurpreet Chhokar (Hausfeld & Co LLP) ask The Lie in LIBOR: Seeds of a Cartel?

ABSTRACT: LIBOR (London Inter-Bank Offered Rate) is one of the world's most significant interest rate benchmarks used to set payments on financial transactions worldwide with a combined value running into the trillions of dollars. This summer the banking world was shocked by the news that LIBOR appeared to have been subject to prolonged and systemic manipulation by a number of the panel banks involved in the rate-setting process.

The LIBOR scandal has so far seen the resignation from Barclays of former chief executive Bob Diamond and two of his closest aides. Moreover, the unfortunate suggestion that the Bank of England encouraged the suppression of LIBOR during the financial crisis period lingers on. In the United Kingdom, reforms intended to "clean up" LIBOR are being pushed through at an accelerated pace. However, it is the alleged involvement of numerous other banks around the globe, and corresponding regulatory investigations worldwide, which have caused allegations of a suspected cartel to surface.

This article considers revelations that make it impossible to dismiss such allegations with any degree of certainty and considers whether the Wheatley reforms will safeguard against future cartel behavior.

December 11, 2012 | Permalink | Comments (0) | TrackBack (0)