Antitrust & Competition Policy Blog

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

Tuesday, November 29, 2016

Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

Mark Shepard analyzes Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange.

ABSTRACT:  Health insurers increasingly compete on their covered networks of medical providers. Using data from Massachusetts’ pioneer insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: these plans attract consumers loyal to the star hospitals and who tend to use their high-price care when sick. Using a structural model, I show that selection creates a strong incentive to exclude star hospitals but that standard policy solutions do not improve net welfare. A key reason is the connection between selection and moral hazard in star hospital use.

November 29, 2016 | Permalink | Comments (0)

Strategic Real Options : Entry deterrence and exit inducement

Maria Lavrutich (Tilburg University, School of Economics and Management) has written on Strategic Real Options : Entry deterrence and exit inducement.

ABSTRACT: The focus of this thesis is the analysis of the strategic behavior of the firms undertaking an irreversible investment decision in an uncertain environment. In particular, this thesis contains three studies, in which we develop continuous-time investment models under uncertainty with lumpy investment. The first two studies analyze firms’ competitive strategies in a setting where they decide not only upon the optimal timing of the investment, but also upon the scale of its installment. In Chapter 2, we examine how hidden competition affects the capacity investment decisions in a duopoly. Chapter 3 extends the strategic investment model with capacity choice by incorporating the exit option. Chapter 4 presents a stochastic dynamic model of predatory pricing under firm-specific uncertainty.

November 29, 2016 | Permalink | Comments (0)

Monday, November 28, 2016

AALS Antitrust Section – Extended Deadline for Nominations re. Virtual Election for Appointment to the Executive Committee 2016

AALS Antitrust Section – Extended Deadline for Nominations re. Virtual Election for Appointment to the Executive Committee

Dear AALS Antitrust Section Membership,

Please participate in the first virtual election to appoint the newest member to the Antitrust and Economic Regulation Section (Antitrust Section) of AALS. The following link will direct you to the Antitrust Section membership page (password protected) which will direct you to the Wufoo nomination form that also explains the process in greater detail. 

 

http://connect.aals.org/antitrust 

 

 

Here is the summary version of the relevant information:

·      This election is to select the newest member of the Executive Committee. 

·      The Antitrust Section’s Executive Committee is comprised of 6 members. The most senior member (as defined by year of appointment to the board) serves as the Chairperson. After serving as Chairperson for one year, he/she rotates off the Executive Committee and the next most senior member becomes the new Chairperson.

·      This election will occur in two phases. Phase one involves soliciting nominations and it is now extended through December 4th (Sunday).  Phase two, the actual vote itself, is slated for shortly thereafter in December.  

·      Only faculty and administrators of member schools are eligible to hold office.  Only Antitrust Section members may offer nominees or vote.  The nominees must be members of the Antitrust Section before being placed on the ballot.  

·      The three individuals who receive the greatest number of nominations and who meet the other requirements (membership in the Antitrust Section, research/teaching interests falling squarely within field of antitrust, and who indicate a willingness to be placed on the ballot after being contacted by the Executive Committee) along with up to two additional nominees selected by the Executive Committee (who also meet the requirements) will constitute the final slate of candidates.

·      Persons who previously served on the Executive Committee are ineligible for nomination.  A list of those individuals is provided when you click on the Wufoo link.  If you have not previously served on the Executive Committee, you may nominate yourself!

·      Any questions about section membership or your AALS account credentials, please email support@aals.org.

·      If you have any technical questions, please contact Mr. Patrick Riley (Manager of Section Services, AALS) at priley@aals.org.

·      Please direct any other questions or comments to Antitrust Section Chairperson Hillary Greene at hillary.greene@uconn.edu.

The Executive Committee greatly appreciates your participation in this process.

Sincerely,

Hillary Greene, Chair

C. Scott Hemphill, Chair-Elect

Rebecca Haw Allensworth

Aaron Edlin

Harry First

Alan J. Meese

November 28, 2016 | Permalink | Comments (0)

The effect of entry on R&D networks

Emmanuel Petrakis and Nikolas Tsakas discuss The effect of entry on R&D networks.

ABSTRACT: We investigate the effect of potential entry on the formation and stability of R&D networks considering farsighted firms. We show that the presence of a potential entrant often alters the incentives of incumbent firms to establish an R&D link. In particular, incumbent firms may choose to form an otherwise undesirable R&D collaboration in order to deter the entry of a new firm. Moreover, an incumbent firm may refrain from establishing an otherwise desirable R&D collaboration, expecting to form a more profitable R&D link with the entrant. Finally, potential entry may lead an inefficient incumbent to exit the market. We also perform a welfare analysisand show that market and societal incentives are often misaligned.

November 28, 2016 | Permalink | Comments (0)

Product Differentiation with Multiple Qualities

F. Barigozzi and C. A. Ma examine Product Differentiation with Multiple Qualities.

ABSTRACT:  We study subgame-perfect equilibria of the classical quality-price, multistage game of vertical product differentiation. Each firm can choose the levels of an arbitrary number of qualities. Consumers’ valuations are drawn from independent and general distributions. The unit cost of production is increasing and convex in qualities. We characterize equilibrium prices, and the equilibrium effects of qualities on the rival’s price in the general model. We present necessary and sufficient conditions for equilibrium differentiation in any of the qualities.

November 28, 2016 | Permalink | Comments (0)

Price Competition in Product Variety Networks

Ushchev, Philip and Zenou, Yves Price examine Competition in Product Variety Networks.

ABSTRACT: We develop a product-differentiated model where the product space is a network defined as a set of varieties (nodes) linked by their degrees of substitutability (edges). We also locate consumers into this network, so that the location of each consumer (node) corresponds to her “ideal” variety. We show that, even though prices need not to be strategic complements, there exists a unique Nash equilibrium in the price game among firms. Equilibrium prices are determined by both firms’ sign-alternating Bonacich centralities and the average willingness to pay across consumers. They both hinge on the network structure of the firm-product space. We also investigate how local product differentiation and the spatial discount factor affect the equilibrium prices. We show that these effects non-trivially depend on the network structure. In particular, we find that, in a star-shaped network, the firm located in the star node does not always enjoy higher monopoly power than the peripheral firms.

November 28, 2016 | Permalink | Comments (0)

Genentech: No EU Competition Law Barrier to Patent Royalties Despite Invalidity or Non-infringement of the Licensed Patent(s)

Helen Hopson, Bristows has written on Genentech: No EU Competition Law Barrier to Patent Royalties Despite Invalidity or Non-infringement of the Licensed Patent(s).

ABSTRACT: The Court of Justice has confirmed that EU competition law prohibition of anticompetitive arrangements does not preclude the entitlement to patent royalties in the event of the revocation or finding of non-infringement of the licensed patent(s), provided that the licensee was able freely to terminate the licence by giving reasonable notice.

November 28, 2016 | Permalink | Comments (0)

Friday, November 25, 2016

Competition Law Compliance Programmes

Johannes Paha has edited the interesting Competition Law Compliance Programmes.

BOOK ABSTRACT: Improved detection, rising fines, a greater relevance of private damages claims (especially in Europe), and longer prison sentences (for example in USA) have raised the necessity for firms to implement measures that prevent their managers and other employees from violating competition laws (e.g., by engaging in price fixing or the abuse of a dominant position). Competition law compliance programmes have increasingly been implemented by European firms since about the year 2005 while having been in use by, e.g., US-American firms already for a somewhat longer period. Yet, research on this topic is often relatively new and sparse. Such work has mainly been done by legal scholars but increasingly also by researchers in business administration and economics. However, concepts relevant for competition law compliance have been examined by psychologists and political scientists, too. This poses two challenges. First, researchers sometimes work on this topic within the confines of their disciplines without necessarily knowing all the relevant concepts and results established in other fields. Second, practitioners had to implement and design competition law compliance programmes to the best of their knowledge without necessarily getting the scientific advice they may have wished for.

November 25, 2016 | Permalink | Comments (0)

The Interface between Competition and the Internal Market: Market Separation under Article 102 TFEU

Vasiliki Brisimi has authored The Interface between Competition and the Internal Market: Market Separation under Article 102 TFEU.

BOOK ABSTRACT: This book explores the interface between competition law and market integration in the application of Article 102 of the Treaty on the Functioning of the European Union (TFEU), focusing on the notion of 'market separation'-namely conduct that may hinder cross-border trade. The discussion reviews, among other things, the treatment of geographic price discrimination and exclusionary abuse, by which out-of-state competitors are affected. 'Market separation' cases are treated in the book as a case study for appraising the interface between competition and the Internal Market. On this basis, the book provides a comparative analysis of the Treaty requirements under Article 102 TFEU when applied in 'market separation' cases and the Treaty requirements under the free movement provisions. In addition, it utilises 'market separation' cases as a springboard for advancing an informed reformulation of the application of Article 102 TFEU when state action comes into play.

All in all, the analysis presented in the book deconstructs the elements for establishing 'market separation' as an abuse of the dominant position. It shows that there is nothing that would justify a distinctive treatment of 'market separation' under Article 102 TFEU, other than a principled understanding of Internal Market law as a whole: whatever understanding one reaches about the proper shape of the Internal Market, interrogation of the proper application of competition law comes after that and thus should be informed by this understanding.

November 25, 2016 | Permalink | Comments (0)

Thursday, November 24, 2016

Does Merger Policy Converge after the 2004 European Union Reforms

Mats Bergman, Sodertorn University, Stockholm, Malcolm B. Coate, U.S. Federal Trade Commission (FTC), Anh T. V. Mai, Sodertorn University (University College of Southern Stockholm), and Shawn W. Ulrick, U.S. Federal Trade Commission (FTC) ask Does Merger Policy Converge after the 2004 European Union Reforms.

ABSTRACT: With almost ten years of experience with the reformed European merger policy, sufficient data has been accumulated to explore the impact of the reform on the difference between the European Union (EU) and the United States (US) merger policy. We expect the EU 2004 reform that established a “significant impediment to effective competition” standard close to the US “substantial lessening of competition” standard would lead to some convergence. We start by identifying changes in the EU regime and verifying the consistency in the US regime. We detect a weaker EU policy for clear dominance and monopoly cases and some changes in its collusion policy after the reform. The incidence of collusion cases falls while EU’s policy, conditional on collusion being the theory of harm, appears stronger. Limited data precludes detailed analysis for the non-dominance unilateral concerns, although the EU data implies stability in the challenge probability associated with that type of case. The US results remain stable over time. Decompositions show some convergence in policy for unilateral cases and non-parametric analysis shows further convergence occurs in unilateral effects analysis. Matching analysis is attempted, but fails to generate any results, because even adjusted, the two sample distributions are not sufficiently balanced, so we must rely on the structural form assumptions of our logit models.

 

 

November 24, 2016 | Permalink | Comments (0)

The China Inc. illusion

Angela Zhang (King's College) has an op-ed on The China Inc. illusion.

November 24, 2016 | Permalink | Comments (0)

Wednesday, November 23, 2016

Congrats to the Women in Antitrust 2016: Academics

The GCR has announced its 2016 women in antitrust - academics. 

Amelia Fletcher

Eleanor Fox

Diana Moss

Fiona Scott Morton

Koren Wong-Ervin

 

All have made an important impact in operationalizing antitrust academic insights in the practice community.

November 23, 2016 | Permalink | Comments (0)

All-Units Discounts as a Partial Foreclosure Device

Yong Chao, University of Louisville - College of Business - Department of Economics, Guofu Tan, University of Southern California - Department of Economics, and Adam Chi Leung Wong, discuss Lingnan University All-Units Discounts as a Partial Foreclosure Device. Worth downloading!

ABSTRACT: We investigate the strategic effects of all-units discounts (AUDs) used by a dominant firm in the presence of a capacity-constrained rival. Due to the limited capacity of the rival, the dominant firm has a captive portion of the buyer’s demand for the single product. As compared to linear pricing, the dominant firm can use AUDs to go beyond its captive portion by tying its captive demand with part of the competitive demand and partially foreclose its small rival. When the rival’s capacity level is well below relevant demand, AUDs reduce the buyer’s surplus.

 

 

November 23, 2016 | Permalink | Comments (0)

I love Chile! Reflections from Chile's 2016 Competition Day

Chile is blessed with great enforcers at the Fiscalía Nacional Económica (headed by Felipe Irarrázabal) and a highly quality competition tribunal of three lawyers and two economists (headed by Enrique Vergara).  For the second time I was a speaker for Chile's Competition Day. This was very effective outreach for Chile's competition system.  The event, held last Thursday at the W Hotel in Santiago had roughly 600 attendees.  The event began with presentations by President of Chile Michelle Bachelet and Minister of Economy Luis Felipe Céspedes.  Both presentations were excellent. Below is a picture of Enrique Vergara, Felipe Irarrázabal, Michelle Bachelet, and Luis Felipe Céspedes.

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Bachelet's presence was important given that Chile has criminalized cartel offenses. 0Z0A2954

Céspedes discussed competition and economic growth (including entrepreneurship and innovation).

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My presentation focused on online competition.

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There were a series of international experts who presented. The level of ability of enforcers, private sector, and academic communities in Chile is very high. This model for Competition Day is something that more agencies should do.

November 23, 2016 | Permalink | Comments (0)

Diagnosing Foreclosure Due to Exclusive Dealing

John Asker, UCLA is Diagnosing Foreclosure Due to Exclusive Dealing.

ABSTRACT: Exclusive dealing arrangements, in which a distributor agrees to work exclusively with a single manufacturer, can be efficiency enhancing or can be an anticompetitive means to foreclose markets. This paper evaluates the effect of exclusive distribution arrangements on competition in the Chicago beer market in 1994. A diagnostic test is provided to judge whether exclusive arrangements lead to foreclosure. To implement this test a model of consumer demand and firm behavior is estimated that incorporates industry details and allows for distribution through exclusive and shared channels. The test indicates that foreclosure effects are not present in this market.

 

 

November 23, 2016 | Permalink | Comments (0)

Foreclosing Competition Through High Access Charges and Price Discrimination

Angel L. Lopez, Autonomous University of Barcelona and Rey Patrick, Toulouse School of Economics; Centre for Economic Policy Research (CEPR) study Foreclosing Competition Through High Access Charges and Price Discrimination.

ABSTRACT: This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non‐linear tariffs and may charge different prices for on‐net and off‐net calls. When access charges are high, this allows the incumbent to foreclose the market in a profitable way if switching costs are sufficiently large. In the absence of termination‐based price discrimination, however, such foreclosure strategies are not profitable.

November 23, 2016 | Permalink | Comments (0)

Tuesday, November 22, 2016

Entry Models Applied to Churches: Could Protestants Use a Catholic Bishop to Solve Excess Entry?

Michael W. Walrath, University of St. Thomas asks Entry Models Applied to Churches: Could Protestants Use a Catholic Bishop to Solve Excess Entry?

ABSTRACT: This paper studies the entry behavior of churches of different religious denominations. In a given town, there tend to be fewer Catholic churches (with more members) than there are Protestant churches. Entry of Catholic churches can be considered centralized, since entry is controlled by a bishop; whereas, the entry of Protestant churches is rather decentralized. I estimate an entry game for Protestants, then conduct counterfactuals looking at how entry would change if it were centralized. I find that a large portion of the differences in entry between Catholic and Protestant churches is explained by this difference in entry regulation.

 

 

November 22, 2016 | Permalink | Comments (0)

Developments in International Enforcement Co-operation in the Competition Field

Antonio Capobianco (OECD) and Aranka Nagy (Hungarian Competition Authority) describe Developments in International Enforcement Co-operation in the Competition Field.

ABSTRACT: •International co-operation in competition law enforcement has made significant progresses in the last two decades, mainly through the development of bilateral relationships between competition authorities. •Although it is still important for competition authorities to explore the way to deepen their existing bilateral relationships, it is equally important to consider the limitations of bilateral co-operation in pursuing effective and efficient international co-operation in competition law enforcement. •To ensure that antitrust enforcement in cross-border cases continues to be effective, agencies should explore new forms of enhanced cooperation, including the possibility to recognise competition decisions of foreign agencies, introduce one-stop shop systems and lead agency models.

November 22, 2016 | Permalink | Comments (0)

AAI 2016 Airline Roundtable: The Changing Airline Competition Agenda - December 14, 2016

AAI 2016 Airline Roundtable: The Changing Airline Competition Agenda

DATE: DEC 14, 2016
LOCATION: NATIONAL PRESS CLUB, WASHINGTON DC

On December 14, the American Antitrust Institute will host its second annual Airline Roundtable. Experts in antitrust and regulation from government, industry, advocacy, and academia will discuss major competition issues facing the airline industry and consumers of air travel. Recent antitrust and regulatory events in the airline industry make this an especially timely program, including developments involving Open Skies applications, requests for antitrust immunity, domestic mergers, and a renewed focus on distribution. This year's Roundtable will focus on challenges to competition, with the goal of focusing antitrust and regulatory aviation policies to promote rivalry, innovation, and consumer benefits. The day will include a "Year in Review," three panels, a keynote luncheon, and roundtable discussions.

Panel 1: Promoting Competition in U.S. Markets - Assessing Open Skies and Antitrust Immunity
This panel will take a look at challenges to opening domestic airline markets to competition. Panelists will explore the debate surrounding the interface between international aviation and domestic competition, with an eye toward how consolidation between the large U.S. carriers has changed the equation. Among other questions, the panel will assess the current climate around, and issues raised by, Open Skies applications by foreign carriers and the regulatory framework governing grants of antitrust immunity for the international airline alliances. Panelists will examine the effectiveness and balancing of antitrust and regulatory policies in facilitating competition and a consumer-facing aviation policy.

Panel 2: Slots, Gates, Airports, and Market Entry
This panel will examine entry as a major enforcement and policy tool for promoting competition in U.S. markets. The U.S. Department of Justice has expressed concern over both unilateral and coordinated conduct involving domestic airlines. Unilateral concerns have arisen particularly at congested airports where takeoff and landing slots are valuable. Past remedies in airline enforcement actions have focused on market entry through access to slots and gates. Panelists will consider whether these actions adequately promote competition and protect consumers. They will also consider the likely impact of regulatory initiatives involving slot allocation rules and proposals to privatize the air traffic control system on competition and consumers.

Panel 3: The State of Air Travel Distribution
We will focus on the importance of air travel distribution and ongoing developments that might affect competition within and across distribution channels. Panelists will unpack policies involving: access to airline fare and availability data; surcharges on itineraries purchased outside airline websites; a “standard” distribution model; and other initiatives that can potentially affect the playing field for the distribution of air travel. The discussion will tie in antitrust and regulatory tools for addressing competition and consumer issues surrounding distribution.

November 22, 2016 | Permalink | Comments (0)

Telefonica and Portugal Telecom v Commission: Assessment of a Non-Compete Clause Unrelated to the Actual Transaction

Jolling K. de Pree and Simone J.H. Evans analyze Telefonica and Portugal Telecom v Commission: Assessment of a Non-Compete Clause Unrelated to the Actual Transaction.

ABSTRACT: The General Court ruled that the European Commission rightfully qualified a non-compete clause as an object restriction in spite of the fact that the contract provided that the stipulation was valid only ‘to the extent permitted by law’.                   

November 22, 2016 | Permalink | Comments (0)