Friday, April 18, 2014
Gary Madden, Department of Econometrics and Quantitative Modelling, Curtin University, Australia, Erik Bohlin, Department of Technology Management and Economics, Chalmers University of Technology, Sweden, Thien Tran, Communication Economics and Electronic Markets Research Centre, Curtin University, Australia and Aaron Morey, Department of Economics, University of Melbourne, Australia analyze Spectrum licensing, policy instruments and market entry.
ABSTRACT: Competition policy attempts to address the potential for market failure by encouraging competition in service markets. Often, in wireless communication service markets, national regulatory authorities seek to encourage entry via the spectrum assignment process. Instruments used include the assignment mode (auction or beauty contest), setting aside licenses and providing bidding (price and quantity) credits for potential entrants, and making more licenses (spectrum blocks) available than incumbent firms (excess licenses). The empirical analysis assesses the effectiveness of these policy instruments on encouraging entry. The econometric results show that the probability of entry is enhanced by using auction assignments and excess licenses. Furthermore, quantity, but not price, concessions encourage entry.
Thursday, April 17, 2014
The impact of regulation and competition on the adoption of fibre-based broadband services: Recent evidence from the European Union member states
Wolfgang Briglauer, Vienna University of Economics and Business discusses The impact of regulation and competition on the adoption of fibre-based broadband services: Recent evidence from the European Union member states.
ABSTRACT: Fibre deployment of next-generation high-speed broadband networks is considered to be a decisive development for any information-based society, yet investment activities and especially the adoption of fibre-based broadband services take place only very gradually in most countries. This work employs static and dynamic model specifications and identifies the most important determinants of the adoption of fibre-based broadband services with recent panel data from the European Union member states for the years from 2004 to 2012. The results show that the more effective previous broadband access regulation is, the more negative the impact on adoption, while competitive pressure from mobile networks affects adoption in a non-linear manner. It appears that the approach of strict cost-based access regulation embedded in the EU regulatory framework is at odds with the targets outlined in the European Commission's Digital Agenda. Finally, we also find evidence for substantial network effects underlying the adoption process.
John B. Kirkwood, Seattle University School of Law discusses Collusion to Control a Powerful Customer: Amazon, E-Books, and Antitrust Policy.
ABSTRACT: In July 2013 a federal judge held that Apple had violated antitrust law by conspiring with publishers to raise e-book prices. Many critics contended that the case targeted the wrong parties; the real threat to competition was not the publishers and Apple, but Amazon. According to the critics, Amazon’s predatory pricing and aggressive use of buyer power were likely to create a monopoly, lead to even higher prices in the long run, and deprive publishers and authors of the revenues needed to develop a rich array of new titles.
The evidence, however, indicates the opposite: Amazon was almost certainly engaged in procompetitive loss leading, not predatory pricing, and fears of an eventual Amazon monopoly were largely unfounded. Amazon’s buyer power, moreover, was not monopsony power, which is frequently harmful, but countervailing power, which can lead to lower consumer prices. Finally, there was no evidence that Amazon’s exercise of this power had adversely affected the number or variety of new books. While the e-books conspiracy was unjustified, the larger issue remains: whether collusion to control a powerful customer can ever be justified. This article concludes, contrary to prevailing law, that it can. It also develops, in more detail than any prior effort, a workable defense for such behavior. The defense is demanding, but when the facts are established, it would provide a remedy for anticompetitive buyer power that antitrust law would otherwise not reach.
Does one more or one less mobile opertor affect prices? A comprehensive ex-post evaluation of entries and mergers in European mobile telecommunication markets
Gergely Csorba, Centre for Economic and Regional Studies of the Hungarian Academy of Sciences and Zoltan Papai, Infrapont Economic Consulting ask Does one more or one less mobile opertor affect prices? A comprehensive ex-post evaluation of entries and mergers in European mobile telecommunication markets.
ABSTRACT: This paper estimates the impact of entries and mergers on the price of mobile voice services in a panel database of 27 European Member States between 2003 and 2010. Our difference-in-differences econometric methodology exploits the variance in different structural changes between countries to separate the respective effects. Our results show that the effect of entry crucially depends on the number of active operators and the type of entrant, and not controlling for these differences might lead to misleading conclusions. We find no robust evidence that entry has a price-decreasing effect on markets with originally 2 operators. However, the entry of a 4th operator does have a price-decreasing effect, but with different dynamics concerning the entrant's type. When we separate entry effects for the subsequent years, we show that the significant price-decreasing effects for local operators entering occur only in the first year after entry, while the price-decreasing effects for multinational entries are significantly larger on the long-run. Last, we find no price-increasing effects of 5-to-4 mergers, but a long run price-increasing effect of a 4-to-3 merger.
Marco Gambaro, DEAS, Universita degli Studi di Milano and Riccardo Puglisi, DESED, Universita di Pavia and Centro Studi Luca d'Aglianov explore Complement or substitute? The Internet as an Advertising Channel, Evidence on Advertisers on the Italian Market, 2005-2009.
ABSTRACT: During the last decade the internet has been the fastest growing segment in advertising. Exploiting Nielsen data, we analyze the advertising pattern displayed by the population of organizations (i.e. companies, non-profit institutions and public entities) that were active on the Italian national market during the period 2005-2009. Some reduced form evidence shows that - during this time period - smaller firms increased their ads investment on newspapers, magazines cinema comparatively more than larger firms. Radio and the internet display an opposite pattern, whereas are larger firms increasing their expenses more than smaller firms. In the lack of firm specific output data, we also estimate a homothetic advertising cost function for different subsets of the sample. We find that media segments are (loose) substitutes, in that the estimated cross-price elasticities are positive but decidedly less than one.
Liza Lovdahl Gormsen, University of Manchester asks Are Anti-Competitive Effects Necessary for an Analysis under Article 102 TFEU?
ABSTRACT: This article deals specifically with the different effects-based approaches that have been taken to Article 102 prior to and after the European Commission’s change of policy in this area of law. Studying this topic now is particularly important for three main reasons. First, Article 102 has recently been subject to a major policy review which generated much debate as to whether the Commission is required to show effects. Secondly, there have recently been some highly significant examples of the Court of Justice both supporting and rejecting the new effects-based approach to Article 102. Finally, the outcome of recent case law has some widespread implications for enforcement policy.
Christopher T. Conlon (Columbia) and Julie Holland Mortimer (Boston College) discuss All-Units Discounts: Experimental Evidence from the Vending Industry.
ABSTRACT: We study an All-Units Discount, in which a downstream firm pays a linear wholesale price up to a quantity threshold, beyond which a discount applies to all future and previous units. The result of the contract is that marginal cost downstream is effectively negative over a quantity range. Such contracts are common in many industries, and we implement a field experiment in one such industry (confections), in which we remove top-selling products from a market in order to identify the potential efficiency effect of the contract. We combine the experimental variation with a structural model of demand and a dynamic model of the retailer’s re-stocking decision to identify cases in which the contract results in either efficient or inefficient exclusion of competing products. We show how the contract allocates the cost of a stock-out between upstream and downstream firms, and find evidence of inefficient exclusion. Finally, we! point out that the impact of upstream mergers in these markets is likely to be felt not through the price in the final-goods market, but rather in the wholesale market. We examine the impact of various upstream mergers on the willingness of the dominant firm to offer rebate contracts, and the impact that the rebate contracts have on social welfare.
Wednesday, April 16, 2014
Teresa Harrison (School of Economics LeBow College of Business Drexel University) and Katja Seim (Department of Business & Public Policy Wharton School University of Pennsylvania) analyze Nonprofit tax exemptions and market structure: The case of fitness centers.
ABSTRACT: Nonprofits are increasingly present in industries with a large for-profit sector, raising questions about their competitive advantage afforded by the nonprofit tax exemption. We estimate an equilibrium model of market structure for recreation/fitness centers to assess whether nonprofit and for-profit firms compete directly for the same customer base. Our results suggest that the two ownership types serve independent markets. Consequently, nonprofits do not meaningfully crowd out for-profit competitors. We find that local property taxes, as a proxy for a firm’s tax burden, significantly affect for-profit entry and that nonprofit entry would fall by 25%, without affecting for-profit entry, if the same property tax liability was imposed.
ANTITRUST IN EMERGING AND DEVELOPING COUNTRIES Concurrences Journal & New York University School of Law Friday, October 24, 2014
ANTITRUST IN EMERGING AND DEVELOPING COUNTRIES
Concurrences Journal & New York University School of Law
Friday, October 24, 2014
Concurrences Journal, in cooperation with New York University Law School, is pleased to invite you to its inaugural conference
Speakers include, among others:
This conference will take place on Friday, October 24, 2014 from 8:30 am to 7:00 pm, at New York University, Greenberg Lounge, 40 Washington Square South, New York.
To read the full program and register for the event click here:
This year again, ICC, the world business organization, in collaboration with ICC Morocco, will bring together senior officials from competition agencies worldwide and business executives to dialogue on subjects that will shape the competition system. The ICC Roundtable on Competition Policy will also provide a unique opportunity for participants to exchange directly with regulators and business experts on current international antitrust issues.
Manjong Lee (Department of Economics, Korea University, Seoul, Republic of Korea) asks Constrained or Unconstrained Price for Debit Card Payment?
ABSTRACT: Retailers in the Netherlands and the U.K. can charge different prices for a commodity depending on whether cash or a debit card is used as payment, whereas retailers in the U.S. generally cannot. These two types of economies with and without a uniform pricing constraint for cash and debit card payments are compared in a microfounded monetary model. We place particular emphasis on the distinctive features of cash and debit cards as payment methods: the cost of a cash transaction for the seller is typically lower than that of a debit card, whereas the cost of cash holdings for the buyer is higher than that of a debit card. Our results suggest that a uniform pricing constraint makes cash-holding costs decline but consumption dispersion between the poor and the rich increase. Numerical examples show that the beneficial effect of the constraint dominates its negative effect.
Martin Labaj (University of Economics in Bratislava, Faculty of National Economy, Department of Economic Policy), Peter Silanie (University of Economics in Bratislava, Faculty of National Economy, Department of Economic Policy) and Christoph Weiss describe Entry and Competition in a Transition Economy: The Case of Slovakia.
ABSTRACT: The present paper provides first empirical evidence on the effects of entry on market conduct for a transition economy. We estimate size thresholds required to support different numbers of firms for seven retail and professional service industries in a large number of distinct geographic markets in Slovakia. Our results suggest a differential impact of entry on market conduct: while market conduct is unaffected by entry in the north-western parts of Slovakia, competition tends to kick in slowly in most professions in the south-east. This latter region suffers from infrastructure bottlenecks and competitors require a larger increase in the number of customers to come in.
Tuesday, April 15, 2014
NAGAOKA Sadao and RIETI NISHIMURA Yoichiro, Kanagawa University discuss Complementarity, Fragmentation, and the Effects of Patent Thickets.
ABSTRACT: This paper empirically investigates the effects of patent thickets. One unique feature of our study is to identify two sources of patent thickets: (1) complementarity as measured by the number of the patents to be used jointly with the focal patent in commercialization, and (2) ownership fragmentation as measured by the number of firms whose patents are cited by an examiner for the granting of the focal patent. There are three major findings. First, there is a significant difference between complex industry sectors and discrete ones regarding complementarity, while the difference regarding fragmentation at the patent level is small. Second, more complementarity is significantly associated with the importance of first mover advantage in research and development (R&D) and (less significantly) with that in commercialization, while fragmentation has little effect on them. Consistent with this finding, complementarity is associated with high patent value. Third, cross licensing motivation significantly accounts for patenting propensity while blocking motivation does not. Complementarity is significantly associated with more patenting for cross licensing, which facilitates both combining the inventions of different firms and preventing the risk of being held up. Furthermore, it does not invite patenting for blocking. Thus, we do not see significantly negative consequences of patent thickets on R&D, as seen by incumbents. At the same time, it is important to pay focus on policy to avoid granting patents to low quality inventions and to facilitate the mechanism of ex-ante contracting in complex industry sectors where patenting motivations are high.
May 13-14, 2014 Ritz-Carlton Hotel Pentagon City Arlington, VA
With stepped up government enforcement in health care, the antitrust issues posed by the collaboration of providers and payers, and private antitrust litigation, the Antitrust in Health Care program, May 13-14, is an important educational opportunity you shouldn't pass up.
The FTC is focusing closely on antitrust in health care as evidenced by its public workshop, "Examining Health Care Competition," held on March 20-21, 2014. To discuss this re-invigorated focus, AHLA and the ABA have invited leading government enforcers, private counsel, and economists, who will share insights, offer practical advice, and analyze recent developments and guidance. Here is a glimpse of just some of the sessions you’ll be able to attend:
- Keynote Address, Edith Ramirez, Chairwoman, FTC
- Year in Review, Roxane Busey, Tim Greaney, and Doug Ross
- View from the Enforcers, Jeff Brennan (moderator), Mark Meier, and Peter Mucchetti
- State of State Action, Holden Brooks, Richard Feinstein, and Eric Stock
- Clinical Integration: Answering the Tough Questions, Christi Braun, Bob Leibenluft, and Chris White
- Assessing Market Power and Harm to Competition in Evolving Health Care Markets, Christopher Garmon, Jeff Spigel, and Lawrence Wu
- Exclusionary Conduct: Do You Know It When You See It? Robert Bloch, Robert McCalln and Richard Raskin
Milena Klasing Chen (CGS - Centre de Gestion Scientifique - MINES ParisTech) has written on THE TWO MODELS BEHIND LOW COST PRODUCTS.
ABSTRACT: Low cost products and services are nowadays present in most sectors. However a clear definition of what makes a low cost product seems to be missing. This article proposes a state of the art on low cost products (through the study of a sample of 42 products recognized as "low cost") and aims to develop a framework to classify them through their design principles, to identify their main characteristics, how they emerge, how they are managed, as well as the impact they have on markets. One of the main conclusions of this work is that two main low cost models should be distinguished. They are labeled i) 'low cost adaptation', where the classical products are striped naked of their non-essential functions to reduce costs, following a functionalist design approach; and ii) 'smart low cost design', that develops a less costly new product from scratch answering to consumer needs, and that can be linked to innovative design theories. These two models should not be mixed up with cost efficiencies models, which are also aimed at reducing costs, but are not a company's main strategy. The studied products show that 'smart low cost design' products are more innovative than 'low cost adaptation' products. The second model is richer and uses elements of the first one. Furthermore, similar effects on the market are observed for both low cost product models, like the creation of demand and the overall price reduction, but the second model seems to have a stronger impact. This work illustrates that a low cost approach can be used as a design tool.
Konstantinos Serfes (School of Economics LeBow College of Business Drexel University) A Price Theory of Vertical and Lateral Integration under Productivity Heterogeneity.
ABSTRACT: We develop a model of organizational choice in a perfectly competitive product market with heterogeneous firms and incomplete contracts. Successful production requires two inputs that are supplied by two different firms. The input suppliers can either remain as separate units or integrate to form an enterprise. The market consists of a continuum of suppliers with heterogeneous productivities. An important feature of our model is the endogenously determined, through matching, distribution of surplus in the bargaining problem between two input suppliers, which as we show has a profound effect on organizational design in a market. We study the interplay between market price, firm productivity and firm boundaries. We show that integration decisions can be non-monotonic with respect to firm productivity. Moreover, depending on the market distribution of firm productivities, a higher market price can induce more or fewer firms! to integrate. In the latter case, the industry supply curve can be backward-bending. These results generate new empirical implications.
Zhijun Chen (Aukland) and Patrick Rey (Toulouse) analyze Competitive Cross-Subsidization.
ABSTRACT: This paper analyzes competitive pricing policies by multiproduct firms facing heterogeneous buying patterns. We show that cross-subsidization arises when firms have comparative advantages on different products but are equally efficient overall: Firms earn a profit from multi-stop shoppers by charging positive margins on their strong products but, as price competition for one-stop shoppers drives total margins down to zero, they price weaker products below cost. Banning below-cost pricing leads to higher profits and higher prices for one-stop shoppers, and may reduce consumer surplus as well as total social welfare.
Monday, April 14, 2014
Orley C. Ashenfelter (Princeton), Daniel Hosken (FTC), and Matthew C. Weinberg (Drexel) ask Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers.
ABSTRACT: In The Antitrust Paradox, Robert Bork viewed most mergers as either competitively neutral or efficiency enhancing. In his view, only mergers creating a dominant firm or monopoly were likely to harm consumers. Bork was especially skeptical of oligopoly concerns resulting from mergers. In this paper, we provide a critique of Bork’s views on merger policy from The Antitrust Paradox. Many of Bork’s recommendations have been implemented over time and have improved merger analysis. Bork’s proposed horizontal merger policy, however, was too permissive. In particular, the empirical record shows that mergers in oligopolistic markets can raise consumer prices.
Gary Biglaiser (University of North Carolina, Chapel Hill), Jacques Cremer Toulouse School of Economics (GREMAQ, CNRS and IDEI), and Gergely Dobos European Commission,(DG Competition) examine Heterogenous switching costs.
ABSTRACT: We consider a simple two period model where consumers have different switching costs. Before the market opens, there was an incumbent who sold to all consumers. We identify the equilibrium both with Stackelberg and Bertrand competition and show how the presence of low switching cost consumers benefits the incumbent, despite the fact that it never sells to any of them.
Itai Rabinovici (DG Competition) analyzes The Application of EU Competition Rules in the Transport Sector.
ABSTRACT: The major legislative development in 2013 was the adoption of the Commission's proposal for a fourth railway package. Air transport was the focus of competition enforcement with the adoption of a commitments decision and three major merger decisions.