Antitrust & Competition Policy Blog

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

Thursday, June 22, 2017

How Effective Are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets

Sahm, Marco and Greiner, Tanja ask How Effective Are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets.

ABSTRACT: We study a two-sided markets model of two competing television broadcasters that offer content of differentiated quality to ad-averse consumers and advertising space to firms. As all consumers prefer high over low quality content, competition for viewers is vertical. By contrast, competition for advertisers is horizontal, taking into account the firms' targeted advertising motive. Analyzing the impact of both, the strength of mutual externalities and advertisement regulation policies, we find the following results: First, broadcasters' profits increase and welfare decreases in the viewers' nuisance costs of advertising. Second, welfare may decrease in the effectiveness of informative advertisement, too. Third, an advertising ban on the high quality medium reduces its viewer market share and thereby the equilibrium reception of high quality content.

June 22, 2017 | Permalink | Comments (0)

Wednesday, June 21, 2017

The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market

Nicholas Ryan analyzes The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market.

ABSTRACT: India, seeking to reduce electricity shortages, set up a new power market, in which transmission constraints sharply limit trade between regions. I use confidential bidding data to estimate the costs of power supply and simulate market outcomes with more transmission capacity. I find that the returns to building transmission hinge on market conduct. Under a competitive model of supply, transmission investments roughly breakeven. Under a strategic model, the same transmission expansion increases market surplus by 19 percent, enough to justify the investment, because low-cost sellers increase supply in response to a more integrated grid.

June 21, 2017 | Permalink | Comments (0)

Improving Patient Access to Care: Performance Incentives and Competition in Healthcare Markets

Houyuan Jiang (Cambridge Judge Business School, University of Cambridge) ; Zhan Pang (College of Business, City University of Hong Kong) ; and Sergei Savin (The Wharton School, University of Pennsylvania) discuss Improving Patient Access to Care: Performance Incentives and Competition in Healthcare Markets.

ABSTRACT: Performance-based compensation is gaining popularity as a mechanism for incentivizing providers of health-care services to improve the quality of patient care. This paper investigates the effects of introducing performance-based incentives in a competitive healthcare market. In particular, we consider a market in which a payer (e.g. a government agency) applies a compensation contract to competing healthcare service providers in order to achieve a certain level of patient access to care, as measured by the expected time patients have to wait to receive care. In our model, we use M/M/1 queueing dynamics to describe patient service processes and assume that patient demand for care delivered by a particular provider is increasing in the level of access to care the provider ensures and decreasing in the levels of access to care at competing providers. Our analysis indicates that the presence of competition between providers may signi cantly alter the intended effect of performance-based incentives. In particular, we show that the joint effect of incentives and competition depends on two factors: 1) the aggressiveness of patient access targets that the payer imposes on providers, and 2) patient sensitivity to the level of access to care. When the payer uses a "soft" approach to performance-based compensation by incentivizing but not requiring that providers reach an access-level target, the incentives and competition can produce opposing effects on patient access to care when aggressive service-level targets are used in the presence of access-sensitive patients or when moderate service-level targets are introduced in environments where patients a exhibit low degree of sensitivity to the level of access to care. In particular, we show that while moderate service-level targets can lead to an improvement in patient access to care when applied to a monopolistic provider, competition in settings with access-insensitive patients may diminish or even reverse this improvement. Under the "strict" approach to performance-based compensation, when the payer designs performance incentives to minimize the cost of imposing a common access-level target on all providers, the impact of competition on the level of incentivization required is also influenced by the patient population type: for access-sensitive patients, competitive pressure lowers the level of incentivization required to achieve a particular level of patient access to care, while for patients with low access sensitivity the effect of competition is to increase the incentivization level required. At the same time, the reduction in payers' costs resulting from the presence of competition is more pronounced in environments with access-insensitive patients.

June 21, 2017 | Permalink | Comments (0)

Toward a coherent policy on cartel damages

Franck, Jens-Uwe and Peitz, Martin offer thoughts Toward a coherent policy on cartel damages.

ABSTRACT: The focus of cartel damages law is on the recovery of the cartel overcharge. Parties other than purchasers are often neglected, not only as a matter of judicial practice, but also due to legal restrictions. We argue that a narrow concept of standing - which excludes parties that supply either the cartel or the firms that purchase from the cartel with complementary product components - falls short of achieving effective antitrust enforcement and corrective justice in the best possible way. We provide a framework with two complementary products and show that under neither competition nor cartelization do the allocation and the distribution of surpluses depend on the market organization in place. Thus, we argue that prima facie producers of complements should be treated alike, regardless of whether they purchase from the cartel or supply the cartel or the cartel's customers. Moreover, based on various factors that determine the enforcement effect of antitrust damage claims and their role as an instrument to achieve corrective justice, we show that a broad concept of standing is, indeed, the preferable legal solution. While its implementation required a change of the position by the U.S. federal courts, we submit that it would amount to a consistent completion of the legal framework within the EU.

June 21, 2017 | Permalink | Comments (0)

R&D Cooperatives and Market Collusion: A Global Dynamic Approach

Jeroen Hinloopen (CPB Netherlands Bureau for Economic Policy Analysis and University of Amsterdam, The Netherlands) ; Grega Smrkolj (Newcastle University, Geat-Britain); and Florian Wagener (University of Amsterdam, The Netherlands) analyze R&D Cooperatives and Market Collusion: A Global Dynamic Approach.

ABSTRACT: We present a continuous-time generalization of the seminal R&D model of d'Aspremont and Jacquemin (The American Economic Review 78(5): 1133–1137, 1988) to examine the trade-off between the benefits of allowing firms to cooperate in R&D and the corresponding increased potential for product market collusion. We consider all trajectories that are candidates for an optimal solution as well as initial marginal cost levels that exceed the choke price. Firms that collude develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus.

June 21, 2017 | Permalink | Comments (0)

Tuesday, June 20, 2017

Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination

Camille Cornand and Rodolphe Dos Santos Ferreira theorize about Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination.

ABSTRACT: The paper provides a micra-founded differentiated duopoly illustration of a beauty contest, in which the weight put on the strategic vs. the fundamental motive of the pay­ offs is not exogenous but may be manipulated by the players. We emphasize the role of the competition component of the strategic motive as a source of conflict with the fun­ damental motive. This conflict, already present in an oligopolistic setting under perfect information, is only exacerbated when information is imperfect and dispersed. We show how firm owners ease such conflict by opting for sorne cooperation, thus moderating the competitive toughness displayed by their managers. By doing so, they also influence the managers' strategic concern for coordination and consequently the weight put on public relative to private information.

June 20, 2017 | Permalink | Comments (0)

An empirical analysis of mergers: Efficiency gains and impact on consumer prices

Bonnet, Céline and Schain, Jan Philip offer An empirical analysis of mergers: Efficiency gains and impact on consumer prices.

ABSTRACT: In this article, we extend the literature on merger simulation models by incorporating its potential synergy gains into structural econometric analysis. We present a three-step integrated approach. We estimate a structural demand and supply model, as in Bonnet and Dubois (2010). This model allows us to recover the marginal cost of each differentiated product. Then we estimate potential efficiency gains using the Data Envelopment Analysis approach of Bogetoft and Wang (2005), and some assumptions about exogenous cost shifters. In the last step, we simulate the new price equilibrium post merger taking into account synergy gains, and derive price and welfare effects. We use a homescan dataset of dairy dessert purchases in France, and show that for two of the three mergers considered, synergy gains could offset the upward pressure on prices post. Some mergers could then be considered as not harmful for consumers.

June 20, 2017 | Permalink | Comments (0)

When multiple merged entities lead in Stackelberg oligopolies: Merger paradox and Welfare

Walter Ferrarese (University of Rome "Tor Vergata") explores When multiple merged entities lead in Stackelberg oligopolies: Merger paradox and Welfare.

ABSTRACT: The merger paradox refers to the fact that in a symmetric static Cournot oligopoly horizontal mergers are generally unprofitable. Moreover, even in case of profitable mergers, remaining outside the merger is better than participating (free-riding issue). In this paper we tackle both issues in a model with linear inverse demand, in which we allow for multiple simoltaneous mergers from a static symmetric Cournot market. Once the mergers occur, each merged entity acquires the right of becoming the leader over the remaining firms outside the mergers (outsiders). We allow the leaders to be heterogeneous in the number of members (insiders). Our model connects and extendes Liu and Wang (2015), who are the first to explore the feature of the leadership acquisiton. They show that if a unique merged entity acquires the leadership, then there is always an incetive for such merger to occur. However, they do not tackle the free riding aspect of mergers. We obtain that the case of a unique leader is the only one in which the merged entity has always an incentive to form. We carry out a welfare analysis and show that, in our setting, despite the symmetry of firms total output can often rise and make consumers better off. Moreover, the adoption of consumers surplus only or consumer surplus plus industry profits as welfare measures does not change the set of welfare improving mergers. This suggests that the common view on horizontal mergers among symmetric firms being unambiguously welfare reducing requires, in some cases a deeper analysis, since the change in the market structure alone can be enough to increase welfare. It also suggests parsimony for the antitrust authorities in evaluating the welafre implications of mergers.

June 20, 2017 | Permalink | Comments (0)

Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition

Bischoff, Oliver and Buchwald, Achim discuss Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition.

ABSTRACT: This paper sheds new light on the assessment of firm networks via multiple directorships in terms of corporate firm performance. Using a large sample of European listed firms in the period from 2003 to 2011 and system GMM we find a significant compensation effect on corporate firm performance for the initial negative effect of horizontal multiple directorships by product market competition. In markets with effective competition, horizontal multiple directorships turn out to be an efficient mechanism to increase firm performance and thus assure competitive advantages. By contrast, linkages between up- and downstream firms have no significant influence on financial performance, irrespective of the level of competition intensity.

June 20, 2017 | Permalink | Comments (0)

Monday, June 19, 2017

Brent Snyder to Hong Kong and note to everyone else - Hong Kong is awesome

I am in Hong Kong today for the second of two talks at Hong Kong University.  The sophisticated and significant antitrust practitioner and academic community based here is abuzz with excitement as the highly capable Brent Snyder leaves DOJ Antitrust for the Hong Kong Competition Commission.  Hong Kong is one of the most amazing cities in the world.  It has amazing food, culture, strong academic institutions (particularly HKU and HKUST) and a diverse population from around the world.  This is a city that should be the hub of regional antitrust.  I have every belief that Brent will do incredibly well. 


June 19, 2017 | Permalink | Comments (1)

The First Summer the DC Was Clearly Ahead of Marvel Since the Batman Trilogy

As readers of this blog know, competition is a good thing.  The Sokol family (the older girls are currently at the wonderful Camp Ramah Darom and we are down to only one girl in the house) has seen a number of movies this summer:

Batman Lego Movie

Wonder Woman

Guardians of the Galaxy 2


While Guardians of the Galaxy 2 had its moments (Baby Groot was very cute), the movie was simply above average.  The Batman Lego Movie and Wonder Woman were both really good and we highly recommend them.  The video game Injustice 2 (and I wonder why Injustice or Injustice 2 were not the basis for the plot of the upcoming Justice League movie) also seems to have had a good story line, although I do not play video games.  Finally, the Arrowverse on TV is loved by my two older girls, particularly Supergirl, Flash and Legends of Tomorrow.  Has DC really moved ahead long term? 

June 19, 2017 | Permalink | Comments (0)

Stepwise Innovation by an Oligopoly

Richard Gilbert, University of California, Berkeley, Christian Riis, Norwegian Business School, and Erlend S. Riis, University of California, Berkeley investigate Stepwise Innovation by an Oligopoly.

ABSTRACT: Stepwise models of technological progress described by Philippe Aghion and his co-authors (1997, 2001, 2005) capture the incentives of firms to innovate in order to escape competition and the disincentives from sharing profits with other technological leaders. The models yield intuitively appealing predictions about the effects of competition on innovation, but they are limited to competition in duopolies. This paper extends the models to oligopolies and shows that the predictions of the effects of competition on innovation from the duopoly models do not generalize to oligopolies.

June 19, 2017 | Permalink | Comments (0)

Competition, Product Safety, and Product Liability

Yongmin Chen and Xinyu Hua have a fascinating paper on Competition, Product Safety, and Product Liability.

ABSTRACT: A firm’s incentive to invest in product safety is affected by both market environment and product liability. We investigate the relationship between competition and product liability in a spatial model of oligopoly, where reputation provides a market incentive for safety investment and higher liability may distort consumers’ incentive for product care. We find that partial liability, together with reputation concerns, can motivate firms to make safety investment. Increased competition due to less product differentiation diminishes a firm’s gain from maintaining reputation and raises the socially desired product liability. On the other hand, an increase in the number of competitors reduces the benefit from maintaining reputation, but has a non-monotonic effect on the potential gain from cutting back safety investment; consequently, the optimal liability may vary non-monotonically with the number of competitors. In general, therefore, the relationship between competition and product liability is subtle, depending on how competition is measured. 

June 19, 2017 | Permalink | Comments (0)

Limited Attention, Salience and Changing Prices: Evidence from a Field Experiment in Online Supermarket Shopping

Kfir Eliaz, Brown University, Orli Oren-Kolbinger, University of Michigan Law School, and Sarit Weisburd, Tel Aviv University examine Limited Attention, Salience and Changing Prices: Evidence from a Field Experiment in Online Supermarket Shopping.

ABSTRACT: How do consumers allocate their attention over price fluctuations in multiple products, and how do they respond to information on these price changes? We address these questions using data from a field experiment on a website that offers purchase and delivery from one large local supermarket chain in the U.S. Our main findings indicate that (i) a large proportion of consumers forego significant saving opportunities that they were aware of, (ii) consumers are more likely to compare prices between substitutes that appear close to each other, and (iii) personalized "nudges" have a differential effect on consumers. Furthermore, we propose a typology of shoppers and shopping trips, based on a level of attentiveness, and show that nudges and information provision helps only the "attentive" shoppers.

June 19, 2017 | Permalink | Comments (0)

Survivor: Three Principles of Economics Lessons as Taught by a Reality Television Show

Dean S. Karlan Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) has written on Survivor: Three Principles of Economics Lessons as Taught by a Reality Television Show.

ABSTRACT: The reality television show Survivor has been a ratings success on CBS for over 16 years. In the show, 16 strangers are marooned in a remote location, required to compete in physical and mental challenges, and periodically vote to eliminate players from the game. The last person remaining wins one million dollars. I use this popular television show to demonstrate three important lessons from principles of microeconomics: (a) for individual decision-making, concepts like pride and honor may belong in the utility function, alongside more classical components such as consumption of goods and services, (b) thinking through how others will respond to your action is critical for good economic and strategic thinking, and (c) repeated interaction can help collusive behavior hold.

June 19, 2017 | Permalink | Comments (0)

Friday, June 16, 2017

Sequential Innovation, Naked Exclusion, and Upfront Lump-Sum Payments

Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) and Christodoulos Stefanadis, University of Piraeus have an interesting paper on Sequential Innovation, Naked Exclusion, and Upfront Lump-Sum Payments.

ABSTRACT: We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader-follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lumps-sum payments in exclusivity contracts (by all suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the incumbent supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation.

June 16, 2017 | Permalink | Comments (0)



August 17th-August 23rd, 2017


Jindal Initiative for Research on IP & Competition (JIRICO) at O.P. Jindal Global University is pleased to announce “a new writing & research colloquium” for young scholars, Ph.D. students and junior faculty scheduled to take place from August 17 to 23, 2017 in India.

Participants will be selected from a global pool of young scholars. They will discuss their ideas, conduct original research with all other workshop participants, during the course of one week culminating in a thought-provoking working paper which will be presented by them on the last day which is the Research colloquium at New Delhi, INDIA.

Senior faculty and scholars will be invited to help guide the discussions and give comments on each paper during the course of the workshop. The commentators will be subject-area experts not only from Jindal Global Law School (JGLS), but also from our reputed partner universities spread around the world. Applicants are welcome to share names of two people who may be invited for commenting on their paper alongwith contact/addresses as well. Other than the workshop attendees, the colloquium audience will include invitee commentators and distinguished experts from the industry, academia and government agencies and the faculty members from O.P Jindal Global University.

JIRICO aims to promote research on relevant areas (not limited to India) at the intersection of IP laws, competition/antitrust law, economics, policy and business by assisting young scholars, including doctoral candidates and junior faculty, conduct original and inter-disciplinary research resulting in publishable papers. The participants will be required to contribute their working papers (at least 5000 words) to “JIRICO Discussion Paper Series” that will be uploaded online on the day of the Colloquium, and are given the option of contributing for a subsequent publication in a good quality, peer-reviewed journal of choice. The working papers must be developed and submitted by September 1st, 2017 for such journal publication to materialize, which is why participants are advised to plan their research and writing before the workshop.

The uniqueness of JIRICO writing & discussion workshop is to bring together and support deserving participants and assist them in their research in an incremental fashion. We expect applicants to submit an extended abstract of 750 to 1000 words consisting of (1) a topic, (2) research questions, (3) proposed methodology, (4) nature of research, (5) scope and jurisdiction of research by Sunday, June 25, 2017.

On a blind basis, participants will be selected and intimated by July 22, 2017. Previously published work or works accepted for publication elsewhere will not be considered.

Full and partial scholarships covering economy-class air travel, accommodation for the duration of the workshop, food and limited access to university services (such as library resources, sports facilities and ongoing university events) will be offered on merit basis.

We will allow co-authored works as long as the participating author fulfills the eligibility requirement stated above. In this case, only the participating author will be eligible for scholarship (full or partial).

Submissions are invited on any topic related to the intersection of law, economics, policy and business, including (but are not limited to):

1. IPR and dominance (pricing, cross-licensing, bundling, refusal etc)

2. ICT and digital markets in the new economy (issues related to SEPs and SSO)

3. Issues of extra-territoriality and comity of antitrust/competition agencies

4. New challenges for the sharing economy and e-commerce models

5. Smart cities, smart homes and legal issues

6. Paperless trade, bitcoins, Fin-tech and banking

7. Artificial Intelligence and legal issues

8. Enterprise IoT and Big Data

9. ICT and investment arbitration

10. Remedies in patent licensing disputes

Interested participants should fill and submit this Google form (link here): by Sunday, June 25, 2017.

For any queries, kindly email us on

The proposed plan is as follows:-

1. August 17 th : Arrival of participants, orientation, distribution of kits and welcome.
2. August 18th – August 22nd : Seminars offered by senior faculty and experts followed by focused discussions and dedicated writing sessions (on a daily basis).
3. August 23rd : Research Colloquium at New Delhi.

Details of the workshop sessions will be shared closer to the date.


June 16, 2017 | Permalink | Comments (1)

Restoring the Legitimacy of Private Antitrust Enforcement

Robert Lande (University of Baltimore) and Josh Davis (University of San Francisco) are Restoring the Legitimacy of Private Antitrust Enforcement.

ABSTRACT: This is a draft chapter from the American Antitrust Institute's 2017 recommendations to the 45th President of the United States. It contains a brief but well-deserved defense of the benefits of private antitrust enforcement and a critique of the claims that private enforcement in the United States is excessive, that it leads to overdeterrence, and that the courts are plagued with widespread frivolous antitrust lawsuits. It also offer a number of specific recommendations for the new administration to implement in the private antitrust enforcement area, including:

* Educate the courts, the public, and federal and state legislatures about the virtues of vigorous private antitrust enforcement, including how it compensates victims and deters anticompetitive conduct.

* Actively support efforts by the European Union and other foreign jurisdictions to develop effective private rights of action.

* Encourage states without effective Illinois Brick legislation to adopt strong and comprehensive legislation.

* Support and encourage the formulation of antitrust jury instructions written in language that juries can understand.

* Undertake a comprehensive study into why so few victims of antitrust violations receive full compensation for their losses. A recent study shows that victims of collusion received only a median of 37% and a mean of 66% of the overcharges they paid to illegal cartels in private damages actions. Why weren’t their recoveries closer to the 300% recovery Congress intended? This chapter contains specific recommendations that address this problem.

June 16, 2017 | Permalink | Comments (0)

Competition Law in EU Free Trade and Cooperation Agreements (And What the UK Can Expect after Brexit)

Florian Wagner-von Papp, University College London Faculty of Laws discusses Competition Law in EU Free Trade and Cooperation Agreements (And What the UK Can Expect after Brexit).

ABSTRACT: This paper outlines the system of concentric circles of cooperation in competition law enforcement around the European Union (EU). It examines the intergovernmental and inter-agency agreements which the EU concluded in order to address the complexities of the transnational economy of the 21st century. It then turns to a development that does not fit this neat picture of ever-increasing cooperation at all: Brexit and its implications.

National competition law enforcers face an increasingly transnational economy. The increase in free trade and competition advocacy has resulted in a proliferation of national competition law regimes. The patchwork of multiple unilateral enforcement by individual states leads to enforcement gaps and enforcement overlaps. While some call for global solutions to global problems and advocate a global competition agency (or appointing a lead jurisdiction), it is questionable if such centralisation would be desirable and at any rate it does not seem politically feasible. The intermediate path between pure unilateral enforcement and a centralised global enforcer consists in unilateral enforcement tempered by cooperation and coordination of enforcement activities.

Regional cooperation leads to internally relatively homogeneous clusters, and reduces complexity on the global scale. The extremely close cooperation in such regional cooperation agreements is supplemented by a second layer of reciprocal cooperation links, which are characterised by a slightly lower but still high degree of internal homogeneity, and accordingly cooperation that does not go quite as far as the one in the central region. As we move in concentric circles further away from the centre, heterogeneity of competitive conditions or interests increases and the depth of cooperation decreases. This results in regional clusters. Within each cluster, issues of gaps and overlaps can be reduced to the greatest possible extent. Some of the clusters are interconnected among each other by bilateral links (such as CETA between the EU and Canada). Between clusters, the weaker cooperation and coordination may not resolve all gaps and overlaps, but as global heterogeneity of views on competition policy decreases through the work of international organisations (such as the OECD, the ICN or APEC), gradual progress is made here as well.

Brexit will take the United Kingdom (UK) out of the EU, and most likely the European Economic Area (EEA) and the Customs Union as well. This means that the UK will have to negotiate not only its competition cooperation with the EU and its Member States, but also needs to replicate the links to the many jurisdictions to which the UK had links by virtue of its EU membership.

June 16, 2017 | Permalink | Comments (0)

Thursday, June 15, 2017

The Amex Decision and the Future of Antitrust for Two-Sided Platforms

Henry B. McFarland, Economists Incorporated describes The Amex Decision and the Future of Antitrust for Two-Sided Platforms.

ABSTRACT: This article discusses the recent Second Circuit decision in the Justice Department’s antitrust case against American Express (Amex). The decision has important implications for antitrust in all industries involving two-sided platforms. The article focuses on the issues of market definition, market power, and anticompetitive effects. The decision stresses the importance of looking at both sides of the market when considering each of these issues. As a result, antitrust enforcement will be more difficult but also better. By requiring a full analysis of the effects of challenged behavior on all groups of a platform’s customers, the decision may prevent actions against behavior that significantly benefits consumers.

June 15, 2017 | Permalink | Comments (0)