Antitrust & Competition Policy Blog

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

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Monday, December 24, 2012

Alan Meese on Bork

Posted by D. Daniel Sokol

Alan Meese (William & Mary) has a very thoughful post on Bork and antitrust. Alan just shared it with me so apologies that I just posted it now.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Strategic Bypass Deterrence

Posted by D. Daniel Sokol

Francis Bloch (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X) and Axel Gautier (HEC-University of Liege - Department of Economics analyze Strategic Bypass Deterrence.

ASBTRACT: In liberalized network industries, entrants can either compete for service using the existing infrastructure (access) or deploy their own infrastructure capacity (bypass). In this paper, we demonstrate that, under the threat of bypass, the access price set by an unregulated and vertically integrated incumbent is compatible with productive efficiency. This means that the entrant bypasses the existing infrastructure only if it can produces the network input more efficiently. We show that the incumbent lowers the access price compared to the ex-post efficient level to strategically deter ineffi cient bypass by the entrant. Accordingly, from a productive effi ciency point of view, there is no need to regulate access prices when the entrant has the option to bypass. Despite that, we show that restricting the possibilities of access might be profi table for consumers and welfare because competition is fiercer under bypass.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Capacity Choice under Uncertainty with Product Differentiation

Posted by D. Daniel Sokol

Christiaan Behrens (VU University Amsterdam) Mark Lijesen (VU University Amsterdam) discuss Capacity Choice under Uncertainty with Product Differentiation.

ABSTRACT: This article analyses the capacity-then-price game for a duopoly market. We add to the literature by explicitly taking product differentiation into account. We study the impact of capacity costs, demand uncertainty, and vertical and horizontal product differentiation on equilibrium capacities, efficiency, and price dispersion. We identify a minimum degree of vertical product differentiation, relative to horizontal product differentiation, for which the subgame perfect Nash equilibrium in pure strategies is guaranteed to exist. We find that if firms' quality differences exactly offset cost differences, asymmetric outcomes in the capacity stage arise, with the low-cost, low-quality firm providing more capacity than its competitor. We show that the highest level of efficiency is reached at the degree of vertical product differentiation where it would be optimal for welfare if firms had equal capacities. Furthermore, our mod! el provides an explanation for ambiguous results in empirical research on price dispersion.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)