Antitrust & Competition Policy Blog

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

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Tuesday, February 14, 2012

Endogenous specialization of heterogeneous innovative activities of firms under technological spillovers

Posted by D. Daniel Sokol

Anton Bondarev (University of Bielefeld)discusses Endogenous specialization of heterogeneous innovative activities of firms under technological spillovers.

ABSTRACT: This paper proposes a reduced form model of dynamic duopoly in the context of heterogeneous innovations framework. Two agents invest into product and process innovations simultaneously. Every newly introduced product has its own dimension of process-improving innovations and there is a continuum of possible new products. In the area of process innovations the costless imitation effect is modelled while in the area of product innovations agents are cooperating with each other. As a result the specialization of innovative activity is observed. This specialization arises from strategic interactions of agents in both fields of innovative activity and is endogenously defined from the dynamics of the model.

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

Thinking of an Antitrust Legal Career? See the List of Fellowships Available

Posted by D. Daniel Sokol

Over at TaxProf Blog, there are a list of law fellowships available for those considering academic careers. A fellowship will provide you with mentoring and an opportunity to write. VAP programs:

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

Competition Law in Regulated Industries: On the Case and Scope for Intervention

Posted by D. Daniel Sokol

Rainer Nitsche (ESMT) and Lars Wiethaus (ESMT) have written on Competition Law in Regulated Industries: On the Case and Scope for Intervention.

ABSTRACT: In recent years, competition authorities have applied general competition rules in regulated industries, in addition to or instead of the regulation there in force. This raises issues as the two sets of rules are not necessarily identical and the authorities in charge of applying them do not always pursue the same objectives. This article proposes criteria helping to distinguish cases in which competition law is likely to be a more or less useful complement to regulation. As for cases in which competition law may, in principle, be useful, the authors argue for an intervention that accounts for the objectives set by regulation.

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

Monday, February 13, 2012

Antitrust-IP in Mergers

Posted by D. Daniel Sokol

DOJ Antitrust has released a statement regarding Google/Motorola, Apple/Novell and Rockstar/Nortel. See Statement of the Department of Justice's Antitrust Division on Its Decision to Close Its Investigations of Google Inc.'s Acquisition of Motorola Mobility Holdings Inc. and the Acquisitions of Certain Patents by Apple Inc., Microsoft Corp. and Research In Motion Ltd. I will be covering both of these developments in my antitrust mergers class later this semester. I think that it will be a very interesting two hour session. I also suspect that this will be an important session for the ABA Antitrust Spring Meeting (and if it is not yet -- hint, hint make it one).

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

The Economics of Predation: What Drives Pricing When There is Learning-by-Doing?

Posted by D. Daniel Sokol

David A. Besanko, Northwestern University - Kellogg School of Management, Ulrich Doraszelski, Harvard University - Department of Economics, University of Pennsylvania - Business & Public Policy Department and Yaroslav Kryukov, Tepper School of Business, CMU ask The Economics of Predation: What Drives Pricing When There is Learning-by-Doing?

ABSTRACT: Predatory pricing -- a deliberate strategy of pricing aggressively in order to eliminate competitors -- is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated. The purpose of this paper is to formally characterize predatory pricing in a modern industry dynamics framework. We endogenize competitive advantage and industry structure through learning-by-doing.

We first show that predation-like behavior arises routinely in our model. Equilibria involving predation-like behavior typically coexist with equilibria involving much less aggressive pricing. To disentangle predatory pricing from mere competition for efficiency on a learning curve we next decompose the equilibrium pricing condition. Our decomposition provides us with a coherent and flexible way to develop alternative characterizations of a firm’s predatory pricing incentives, some of which are motivated by the existing literature while others are novel. We finally measure the impact of the predatory pricing incentives on industry structure, conduct, and performance. We show that forcing a firm to ignore these incentives in setting its price can have a large impact and that this impact stems from eliminating equilibria with predation-like behavior. Along with the predation-like behavior, however, a fair amount of competition for the market is eliminated. Overall, the distinction between predatory pricing and pricing aggressively to pursue efficiency is closely related to the distinction between the advantage-building and advantage-denying motives that our decomposition of the equilibrium pricing condition isolates and measures.

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

Platform Economics: Essays on Multi-Sided Businesses

Posted by D. Daniel Sokol

David S. Evans, Global Economics Group, University of Chicago Law School, University College London, Richard Schmalensee, Massachusetts Institute of Technology (MIT) - Sloan School of Management, National Bureau of Economic Research (NBER), Michael D. Noel, University of California, San Diego, Howard H. Chang, Global Economics Group, LLC, and Daniel D. Garcia-Swartz, Compass Lexecon discuss Platform Economics: Essays on Multi-Sided Businesses.

ABSTRACT: This volume collects a series of essays that I have written over the last decade on multi-sided platform businesses that create value by providing products that enable two or more different types of customers to get together, find each other, and exchange value. Part I presents background pieces on the economics of multi-sided platforms and industries in which these platforms are common. Part II examines the antitrust economics of two-sided markets including the difficult problem of defining the boundaries of competition. Part III comprises several papers that apply two-sided market analysis to web-based businesses. Part IV does the same for payment cards which is the industry that attracted much of the early two-sided analysis — in part because this framework was helpful for understanding the hotly debated issue of interchange fees. Part V collects several article and book chapters on software platforms. These platforms have become especially important in the last several years because they are now the basis for revolutionary developments with mobile devices (e.g. the iPhone and Android), social networking (Facebook in particular), and payments (PayPalX).

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

Estimating Market Power with a Generalized Supply Relation: Application to an Airline Antitrust Case

Posted by D. Daniel Sokol

Alessandro Vinícius Marques de Oliveira, Instituto Tecnológico de Aeronáutica (ITA) - Latin American Center for Transportation Economics is Estimating Market Power with a Generalized Supply Relation: Application to an Airline Antitrust Case.

ABSTRACT:The empirical assessment of market power using conduct parameter models has the weaknesses of lacking proper grounding in oligopoly theory and typically producing inconsistent supply-side estimates. This paper develops an alternative framework for evaluating market power with a freely estimated parameter. This model is based on a marginal profits ratio that balances the marginal profit obtained from collusion with the marginal profit from best-response behavior in a repeated game. It builds upon the concept of efficient collusion, and also allows for a set of possible penal codes for deviation punishment and profits persistence. The resulting generalized supply relation has the advantage of not imposing a particular static non-cooperative equilibrium - a strong restriction that is commonly found in the literature. The model nests important benchmarks of oligopoly theory as special cases, with convenient expressions for homogeneous or differentiated, single or multi-product, price or quantity competition settings. As the proposal is particularly suitable for antitrust investigations, it is applied to a price-fixing case from the airline industry, with the hypothesis of coordinated market power not being rejected by the data. Additionally, alleged price parallelism between carriers did not significantly shift conduct or market outcome.

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

Upstream Competition between Vertically Integrated Firms

Posted by D. Daniel Sokol

Marc Bourreau, Telecom ParisTech, CREST has written on Upstream Competition between Vertically Integrated Firms.

ABSTRACT: We propose a model of two‐tier competition between vertically integrated firms and unintegrated downstream firms. We show that, even when integrated firms compete in prices to offer a homogeneous input, the Bertrand logic may collapse, and the input may be priced above marginal cost in equilibrium. These partial foreclosure equilibria are more likely to exist when downstream competition is fierce or when unintegrated downstream competitors are relatively inefficient. We discuss the impact of several regulatory tools on the competitiveness of the wholesale market.

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

Sunday, February 12, 2012

French Authority's Compliance Guidelines Are Out

Posted by D. Daniel Sokol

The French Authority's Compliance Guidelines are out. See here.

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

Consumers and Competition: The Quest for Real Choice Opportunities

Posted by D. Daniel Sokol

Meglena Kuneva (former Commissioner for Consumer Affairs) addresses Consumers and Competition: The Quest for Real Choice Opportunities.

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