Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, January 26, 2013

Merger Policy for Small and Micro Jurisdictions

Posted by D. Daniel Sokol

Michal Gal (Haifa) has an interesting paper on Merger Policy for Small and Micro Jurisdictions.

ABSTRACT: The wide-spread adoption of merger regulations all around the globe raises the question of whether there is a one-size-fits-all merger policy, or whether some jurisdictions' economic characteristics affect their ability to effectively apply a merger policy in a way which requires some fine-tuning. This question, which generates interesting scholarly and practical debates, is addressed in this paper, focusing on small and on micro jurisdictions. The latter, in particular, bring some of the tradeoffs involved in the design of merger policy to an extreme and provide an interesting and under-explored case study.

Two forces push and pull merger policy. On the one hand, the "follower push" whereby jurisdictions- mostly small, developing or young- benefit from transplanting and following the laws of large, developed jurisdictions with efficient and effective merger regimes. The follower push is often comprised of both internal and external forces. On the other hand, the "unique characteristics pull" whereby the characteristics of a jurisdiction affect its ability to effectively enforce a transplanted law and pull towards adopting a merger policy that best fits its characteristics. Designing a merger law mandates each jurisdiction to find its optimal balance between these two forces and may vary from one jurisdiction to another, depending, inter alia, on the jurisdiction's trade ties and the effectiveness of its enforcement system. Yet these forces do not necessarily lead in different directions; Rather, many parts of a merger regime may fit both the follower and the followed jurisdictions (e.g., adopting a Significant Lessening of Competition test as a benchmark for merger illegality). The challenge is to identify those instances in which the unique characteristics pull leads in a different direction and is stronger than the follower push and to design rules accordingly.

Chapter I briefly explores the two forces noted above. The following chapters focus on the "unique characteristics pull." Chapter II introduces the methodology. Chapter III then explores the effects of the unique characteristics of small size on merger policy. This paper attempts to carry the analysis one step further than that previously performed by the author by proposing a methodological framework to assist in the analysis and by focusing on aspects not previously explored. Chapter IV performs such an analysis for micro economies, a subject which so far has been largely neglected in the literature. Of course, dealing with all aspects of merger policy in such jurisdictions is beyond the scope of a short paper, but some relevant observations and suggestions are offered, based on theoretical observations as well as real-world examples.

January 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, January 25, 2013

The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data

Posted by D. Daniel Sokol

Erwan Gautier (LEMNA) and Ronan Le Saout (ENSAE) discuss The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data.

ABSTRACT: Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market refined oil prices are transmitted to consumer liquid fuel prices. We find that on average gasoline prices are modified once a week and the distribution of price changes displays a M-shape as predicted by an adjustment cost model. Using a reduced form statedependent pricing model with time-varying random thresholds, we find that the degree of pass through of wholesale prices to retail gasoline prices is on average 0:77 for diesel and 0:67 for petrol. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices.

January 25, 2013 | Permalink | Comments (0) | TrackBack (0)

King's College Looking to Expand Competition Law Faculty

Posted by D. Daniel Sokol

See the details for the position (Reader/Senior Lecturer/Lecturer) at King's College Dickson Poon School of Law. Competition law candidates should contact Chris Townley or Alison Jones. Kings is among the strongest competition law faculties in the UK and this is a plumb position.

January 25, 2013 | Permalink | Comments (0) | TrackBack (0)

Identifcation in auctions with selective entry

Posted by D. Daniel Sokol

Matthew Gentry (Institute for Fiscal Studies and Vanderbilt University) and Tong Li (Institute for Fiscal Studies and Vanderbilt University) look at Identifcation in auctions with selective entry.

ABSTRACT: This paper considers nonparametric identification of a two-stage entry and bidding model for auctions which we call the Affiliated-Signal (AS) model. This model assumes that potential bidders have private values, observe imperfect signals of their true values prior to entry, and choose whether to undertake a costly entry process. The AS model is a theoretically appealing candidate for the structural analysis of auctions with entry: it accommodates a wide range of entry processes, in particular nesting the Levin and Smith (1994) and Samuelson (1985) models as special cases. To date, however, the model's identification properties have not been well understood. We establish identifcation results for the general AS model, using variation in factors affecting entry behaviour (such as potential competition or entry costs) to construct identified bounds on model fundamentals. If available entry variation is continuous, the AS m! odel may be point identified; otherwise, it will be partially identified. We derive constructive identification results in both cases, which can readily be refined to produce the sharp identified set. We also consider policy analysis in environments where only partial identifcation is possible, and derive identified bounds on expected seller revenue corresponding to a wide range of counterfactual policies while accounting for endogenous and arbitrarily selective entry. Finally we establish that our core results extend to environments with asymmetric bidders and nonseperable auction-level unobserved heterogeneity.

January 25, 2013 | Permalink | Comments (0) | TrackBack (0)

A Frontier Measure of U.S. Banking Competition

Posted by D. Daniel Sokol

Wilko Bolt, De Nederlandsche Bank, and David Humphrey, Florida State University offer A Frontier Measure of U.S. Banking Competition.

ABSTRACT: The three main measures of competition (HHI, Lerner Index, and H-Statistic) are uncorrelated for U.S. banks. We investigate why this occurs, propose a frontier measure of competition, and apply it to five major bank service lines using data only available since 2008. Fee-based banking services comprise 35% of bank revenues so assessing competition by service line is preferred to using a single measure for traditional activities extended to the entire bank. Academic-based competition measures explain only 1% of HHI variation. HHI merger/acquisition guidelines could be raised since current banking concentration seems unrelated to competition.

January 25, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, January 24, 2013

2013 Concurrences Thesis Award competition

Posted by D. Daniel Sokol

Who may be top of the European entry level competition law job market? See the 2013 Concurrences Thesis Award competition nominees. The theses writers nominated for the 2013 Award are:

  • Rafael Amaro - Paris V
  • Mag. Anna Maria Baumgartner - Wien
  • Sabrina Bringuier Fau - Toulouse
  • Michael J. Frese - Amsterdam
  • Ekaterina Islentyea - Luxembourg
  • Laureen Leblond- Paris Ouest
  • Katerina Maniadaki - King’s College
  • Marek Martyniszyn - University College Dublin

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Same Administration, New Management: What to Expect from DOJ and FTC on Antitrust and Consumer Protection

Posted by D. Daniel Sokol

January 29, 2013 9:30-10:30 AM EST 
Same Administration, New Management: What to Expect from DOJ and FTC on Antitrust and Consumer Protection

The Honorable Dick Thornburgh, K&L Gates

Janet L. McDavid, Hogan Lovells US LLP

J. Brady Dugan, Squire Sanders

Andrea Agathoklos Murino, Wilson Sonsini Goodrich & Rosati

MORE INFORMATION:
Download a PDF of the Invitation
Download Speaker Biographies

Please RSVP to glammi@wlf.org, or register to view online

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Buy-it-now or Take-a-chance: Price Discrimination through Randomized Auctions

Posted by D. Daniel Sokol

Elisa Celis, University of Washington Gregory Lewis, Harvard University; National Bureau of Economic Research (NBER) Markus M. Mobius, Harvard University - Department of Economics; National Bureau of Economic Research (NBER) and Hamid Nazerzadeh University of Southern California - Marshall School of Business explore Buy-it-now or Take-a-chance: Price Discrimination through Randomized Auctions.

ABSTRACT: Increasingly detailed consumer information makes sophisticated price discrimination possible. At fine levels of aggregation, demand may not obey standard regularity conditions. We propose a new randomized sales mechanism for such environments. Bidders can "buy-it-now" at a posted price, or "take-a-chance" in an auction where the top d > 1 bidders are equally likely to win. The randomized allocation incentivizes high valuation bidders to buy-it-now. We analyze equilibrium behavior, and apply our analysis to advertiser bidding data from Microsoft Advertising Exchange. In counterfactual simulations, our mechanism increases revenue by 4.4% and consumer surplus by 14.5% compared to an optimal second-price auction.

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

2013—A Glimpse Into the Future of South African Competition Enforcement

Posted by D. Daniel Sokol

Heather Irvine & Tanya Haskins (Norton Rose) predict 2013—A Glimpse Into the Future of South African Competition Enforcement.

ABSTRACT: The new year is likely to see several interesting developments in South African competition law, following a very busy 2012 in which the Competition Commission made its maiden voyage to the Constitutional Court, Government intervened in several large merger transactions, and the Tribunal handed down three important judgments in cartel cases.

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Ad-valorem platform fees and efficient price discrimination

Posted by D. Daniel Sokol

Zhu Wang (Federal Reserve Bank Richmond) and Julian Wright (National University Singapore) address Ad-valorem platform fees and efficient price discrimination.

ABSTRACT: This paper investigates a puzzle and possible policy concern: Why do platforms such as eBay and Visa that enable the trade of goods of different unobserved costs and values rely predominantly on linear ad-valorem fees, that is, fees that increase in proportion to the sale price of the trades that they enable? Under a broad class of demand functions, we show that a linear ad-valorem fee schedule enables a platform to maximize its profit as if it could actually observe the costs and values of the goods traded and set a different optimal fee for each good. Surprisingly, we find for this class of demands, allowing the platform to set ad-valorem fees (i.e. price discriminate) increases social welfare, both when the platform is regulated to recover costs and when the platform is unregulated.

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Consumer Absenteeism, Search, Advertising, and Sticky Prices

Posted by D. Daniel Sokol

Arthur Fishman (Bar-Ilan University) studies Consumer Absenteeism, Search, Advertising, and Sticky Prices.

ABSTRACT: This paper shows that prices may be sticky when buyers must search to determine the current market price and there is uncertainty about the expected duration of cost changes. Speci…cally, during periods when costs, and hence prices are high, low valuation consumers optimally stop searching and consequently are uninformed about price changes. Then, when costs go down, sellers must advertise to inform those consumers about price cuts. If advertising is costly, relative to single period profit, advertising is profitable only if the cost cut is likely to persist, but not if it is likely to be short lived. Thus, if sellers are initially uncertain about the expected longevity of a cost cut, they might adopt a ‘watch and wait’ strategy, delaying price reductions until better information becomes available. Importantly, it is shown that the same logic does not apply to cost increases. Thus the model is consistent with asymmetric price rigidity (e.g., Peltzman (2000)).

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Reputation and Entry

Posted by D. Daniel Sokol

Jeffrey V. Butler (EIEF), Enrica Carbone (University of Naples "SUN"), Pierluigi Conzo (CSEF), and Giancarlo Spagnolo (Stockholm School of Economics-SITE, University of Rome "Tor Vergata" and CEPR) address Reputation and Entry.

ABSTRACT: This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer.

January 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 23, 2013

Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem

Posted by D. Daniel Sokol

Francesca Busetto (Universita degli Studi di Udine), Giulio Codognato (Universita degli Studi di Udine), and Sayantan Ghosal (Warwick) describe Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem.

ABSTRACT: In this paper, in an exchange economy with atoms and an atomless part, we analyze the relationship between the set of the Cournot-Nash equilibrium allocations of a strategic market game and the set of the Walras equilibrium allocations of the exchange economy with which it is associated. In an example, we show that, even when atoms are countably infinite, Cournot-Nash equilibria yield different allocations from the Walras equilibrium allocations of the underlying exchange economy. We partially replicate the exchange economy by increasing the number of atoms without affecting the atomless part while ensuring that the measure space of agents remains finite. We show that any sequence of Cournot-Nash equilibrium allocations of the strategic market game associated with the partially replicated exchange economies approximates a Walras equilibrium allocation of the original exchange economy.

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Canadian Competition Law—Looking Ahead to 2013

Posted by D. Daniel Sokol

Mark Katz (Davies Ward) undertakes prediction in Canadian Competition Law—Looking Ahead to 2013.

ABSTRACT: The year just ended witnessed a changing of the guard at Canada's Competition Bureau, with Melanie Aitken resigning as Commissioner of Competition in September 2012. Ms. Aitken was replaced on an interim basis by John Pecman, a seasoned Bureau veteran with over 28 years of enforcement experience. It is expected that a permanent replacement for Ms. Aitken will be appointed within the year.

Ms. Aitken only served roughly three years of her five-year term. In that relatively short period of time, however, she engaged in a vigorous-and successful-campaign to raise the profile of competition law enforcement in Canada. Ms. Aitken accomplished this objective by bringing more cases than her recent predecessors and by doing so in areas that matter to Canadian consumers: retail gas, real estate, airlines, telecommunication services, etc.

Can more of the same be expected in 2013 under the Bureau's new administration? All indications to date are that the answer to this question is "yes," and that Mr. Pecman intends to follow the course set by Ms. Aitken, although with a few variations of his own.

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Market Power in Bilateral Oligopoly Markets with Nonexpendable Infrastructure

Posted by D. Daniel Sokol

Yukihiko Funaki (Waseda), Harold Houba (Vrije), and Evgenia Motchenkova (Vrije) analyze Market Power in Bilateral Oligopoly Markets with Nonexpendable Infrastructure.

ABSTRACT: We consider price-fee competition in bilateral oligopolies with perfectly-divisible goods, non-expandable infrastructures, concentrated agents on both sides, and constant marginal costs. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare. Prices equal marginal costs. Threats to switch suppliers set maximal fees. These also arise from a negotiation model that extends price competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but consumer surpluses do not increase. The minimal infrastructure achieving maximal aggregate welfare differs from the one that protects buyers most.

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition in Germany's minute reserve power market: An econometric analysis

Posted by D. Daniel Sokol

Justus Haucap (Dusseldorf Institute for Competition Economics), Ulrich Heimeshoff (Dusseldorf Institute for Competition Economics), Dragan Jovanovic (Dusseldorf Institute for Competition Economics) discuss Competition in Germany's minute reserve power market: An econometric analysis.

ABSTRACT: The German reserve power market was subject to important regulatory changes in recent years. A new market design was created by synchronization and interconnection of the four control areas. In this paper, we analyze whether or not the reforms led to lower prices for minute reserve power (MRP). In contrast to existing papers, we use a unique panel dataset to account for unobserved heterogeneity between the four German regional markets. Moreover, we control for endogeneity by using weather data as instruments for electricity spot market prices. We find that the reforms were jointly successful in decreasing MRP prices leading to substantial cost savings for the transmission system operators.

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

UK cartel enforcement – past, present, future

Posted by D. Daniel Sokol

Ali Nikpay gave an important speech on UK cartel enforcement – past, present, future to the Law Society Anti-Trust Section, 11 December 2012 (now posted).

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Bayesian Nash Equilibrium in ''Linear'' Cournot Models with Private Information About Cost

Posted by D. Daniel Sokol

Sjaak Hurkens (Barcelona GSE) discusses Bayesian Nash Equilibrium in ''Linear'' Cournot Models with Private Information About Cost.

ABSTRACT: Calculating explicit closed form solutions of Cournot models where firms have private information about their costs is, in general, very cumbersome. Most authors consider therefore linear demands and constant marginal costs. However, within this framework, the nonnegativity constraint on prices (and quantities) has been ignored or not properly dealt with and the correct calculation of all Bayesian Nash equilibria is more complicated than expected. Moreover, multiple symmetric and interior Bayesian equilibria may exist for an open set of parameters. The reason for this is that linear demand is not really linear, since there is a kink at zero price: the general ''linear'' inverse demand function is P (Q) = max{a - bQ, 0} rather than P (Q) = a - bQ.

January 23, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 22, 2013

Access to Leniency Documents—Another Piece in the Puzzle Regarding Public and Private Antitrust Enforcement? (Germany)

Posted by D. Daniel Sokol

Dr. Thorsten Mager (Hengeller Mueller), Dr Daniel J. Zimmer and Sarah Milde ask Access to Leniency Documents—Another Piece in the Puzzle Regarding Public and Private Antitrust Enforcement? (Germany)

ABSTRACT: Cartel victims may not be granted access to leniency documents stemming from antitrust prosecution by the Federal Cartel Office (Bundeskartellamt). In the case at issue, the request had been made during an appeal against the fining decision. For the Court, the leniency applicant's reliance on the confidentiality of its cooperation outweighed the cartel victims' interest in disclosure which is generally satisfied by access to the (redacted) fining decision.

January 22, 2013 | Permalink | Comments (0) | TrackBack (0)

Recent Developments in Two-Sided Markets in US and Canada

Posted by D. Daniel Sokol

Recent Developments in Two-Sided Markets in US and Canada

Thursday, January 24, 2013 12:00 – 1:15 PM Eastern Time

The Canadian Competition Bureau has recently brought cases that raise two-sided market issues. In the US, issues related to two-sided markets have arisen in new areas, such as the investigation of Google. This program will discuss the legal and economic issues associated with these recent cases, comparing the approaches taken in the US and Canada and in different industries.

Moderator

Micah Wood, Partner, Blakes

Panelists

David Evans, Chairman, Global Economics Group

Roger Ware, Professor, Queens University

Leah Brannon, Partner, Cleary Gottlieb

Download 1.24.13 Recent Developments in Two Sided Markets (1)

January 22, 2013 | Permalink | Comments (0) | TrackBack (0)