Antitrust & Competition Policy Blog

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

Monday, June 11, 2018

Strategic Effects of Investment and Private Information: The Incumbent’s Curse

Luigi Brighi and Marcello D'Amato offer Strategic Effects of Investment and Private Information: The Incumbent’s Curse.

ABSTRACT: We study a two-period entry model where the incumbent, privately informed about his cost of production, makes a long run investment choice along with a pricing decision. Investment is costreducing and its effects are assumed to differ across incumbent’s types, as a result investment plays a double role as a commitment variable and, along with price, as a signal. We ask whether and how investment decisions allow the incumbent to limit entry into the market. We find that the incumbent will never undertake strategic investment to deter profitable entry, because when incumbent’s costs are private information the signaling role of investment cancels out its value of commitment.

June 11, 2018 | Permalink | Comments (0)

Friday, June 8, 2018

Dynamic Pricing with Search Frictions

Daniel Garcia studies Dynamic Pricing with Search Frictions.

ABSTRACT: We study markets for perishable goods with search frictions. Sellers have a single unit of a good and post prices in every period. Buyers engage in costly search to observe prices and match values. In equilibrium trade starts endogenously and the volume of trade increases over time. Under mild conditions, prices decrease at increasing rates over time. We derive the gains from trade in equilibrium as well as their distribution, and fully characterize the equilibrium for a class of demand functions in markets with evenly matched buyers and sellers. We finally discuss implications for market design, including cancellation policies.

June 8, 2018 | Permalink | Comments (0)

Competitive Differential Pricing

Yongmin Chen (Department of Economics, University of Colorado at Boulder) ; Jianpei Li and Marius Schwartz (Department of Economics, Georgetown University) have an interesting paper on Competitive Differential Pricing.

ABSTRACT:  This paper analyzes differential versus uniform pricing across oligopoly markets that differ in costs of service. We provide necessary and sufficient conditions on general properties of demand for differential pricing to raise or lower profit, consumer surplus, and total welfare, explain why differential pricing is generally beneficial but there are exceptions, and compare the findings to oligopoly third-degree price discrimination. Our conditions nest those for monopoly differential pricing, and are derived by evaluating when each of the welfare measures is convex in marginal cost. Our results help elucidate the welfare effects of prevalent constraints on cost-based differential pricing.

June 8, 2018 | Permalink | Comments (0)

Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach

Régis Chenavaz (LTCI - Laboratoire Traitement et Communication de l'Information - Télécom ParisTech - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique) ; Corina Paraschiv (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche) ; and Gabriel Turinici (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche) review Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach.

ABSTRACT: Dynamic pricing of new products has been extensively studied in monopolistic and oligopolistic markets. But, the optimal control and differential game tools used to investigate the pricing behavior on markets with a finite number of firms are not well-suited to model competitive markets with an infinity of firms. Using a mean-field games approach, this paper examines dynamic pricing policies in competitive markets, where no firm exerts market power. The theoretical setting is based on a diffusion modeì a la Bass. We prove both the existence and the uniqueness of a mean-field game equilibrium, and we investigate mean tendencies and firms dispersion in the market. Numerical simulations show that the competitive market splits into two separate groups of firms depending on their production experience. The two groups differ in price and profit. Thus, high prices and profits do not have to signal anticompetitive practices, stimulating the debate on market regulation.

June 8, 2018 | Permalink | Comments (0)

Input price discrimination with secret linear contracting

Ioannis N. Pinopoulos (Department of Economics, University of Macedonia) offers Input price discrimination with secret linear contracting.

ABSTRACT: We study the welfare effects of input price discrimination when an unconstrained upstream supplier uses linear contracts that are unobservable by downstream firms. With homogeneous final goods, we show that banning input price discrimination decreases welfare. This finding is in contrast to that in the existing literature that considers observable linear contracts. When final goods are sufficiently differentiated, it is shown that banning input price discrimination increases welfare. This result is in contrast to that in the existing literature that considers unobservable two-part tariff contracts..

June 8, 2018 | Permalink | Comments (0)

Thursday, June 7, 2018

Vertical Foreclosure and Multi-Segment Competition

Jullien, Bruno ; Reisinger, Markus ; and Rey, Patrick theorize about Vertical Foreclosure and Multi-Segment Competition.

ABSTRACT: This paper analyzes a supplier's incentives to foreclose downstream entry when entrants have stronger positions in different market segments, thus bringing added value as well as competition. We first consider the case where wholesale contracts take the form of linear tariffs, and characterize the conditions under which the competition-intensifying effect dominates, thereby leading to foreclosure. We then show that foreclosure can still occur with non-linear tariffs, even coupled with additional provisions such as resale price maintenance.

June 7, 2018 | Permalink | Comments (0)

Automobile Prices in Market Equilibrium with Unobserved Price Discrimination

D'Haultfoeuille, Xavier ; Durrmeyer, Isis ; and Février, Philippe analyze Automobile Prices in Market Equilibrium with Unobserved Price Discrimination.

ABSTRACT: In markets where sellers are able to price discriminate, individuals pay different prices that may be unobserved by the econometrician. This paper considers the structural estimation of a demand and supply model à la Berry et al. (1995) with such price discrimination and limited information on prices taking the form of, e.g., observing list prices from catalogues or average prices. Within this framework, identification is achieved by using supply-side conditions, provided that the marginal costs of producing and selling the goods do not depend on the characteristics of the buyers. The model can be estimated by GMM using a nested fixed point algorithm that extends BLP’s algorithm to our setting. We apply our methodology to estimate the demand and supply in the French new automobile market. Our results suggest that discounting arising from price discrimination is important. The average discount is estimated to be 9.6%, with large variation depending on buyers’ characteristics and cars’ specifications. Our results are consistent with other evidence on transaction prices in France.

June 7, 2018 | Permalink | Comments (0)

Multimarket Linkages, Cartel Discipline and Trade Costs

Agnosteva, Delina (Towson University); Syropoulos, Constantinos (Drexel University); and Yotov, Yoto (Drexel University) discuss Multimarket Linkages, Cartel Discipline and Trade Costs.

ABSTRACT: We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, markets that appear segmented are strategically linked via the incentive compatibility constraint. Importantly, trade costs affect cartel shipments and welfare not only directly but also indirectly through discipline. Using extensive data on international cartels, we find that trade costs exert a negative and significant effect on cartel discipline. In turn, cartel discipline has a negative and significant impact on trade flows, in line with the model.

June 7, 2018 | Permalink | Comments (0)

APCO Forum lunch debate on digital markets - Tuesday 12 June


We are pleased to invite you to an APCO Forum lunch debate where we will discuss DG COMP and National Competition Authorities’ initiatives in digital markets.

Our speakers will share their first-hand experiences and views on their authorities’ more recent cases and market studies that touch upon the role of antitrust in digital markets.


From 11:00




APCO Worldwide




Ailsa Sinclair |European Commission, DG Competition




Rethinking competition law for digital companies

Theodor Thanner | Director General - Bundeswettbewerbsbehörde (Austria)


What are the challenges of competition law enforcement in the digital era?

Bitten Thorgaard Sørensen | Deputy Director General - Konkurrence- og Forbrugerstyrelsen (Denmark)

Competition Policy and Enforcement in the Context of the Digital Economy

Victoria Mertikopoulou |  Commissioner - Rapporteur - Eπιτροπή Ανταγωνισμού (Greece)

Antitrust enforcement in digital markets, an economist’s view.

Alexis Walckiers | Chief Economist - Autorité belge de la Concurrence/Belgische Mededingingsautoriteit (Belgium)


Catriona Hatton | Managing Partner at Baker Botts in Brussels






The impact of the fintech revolution in the markets, a competition law perspective

Maria Sobrino | Head of Market Studies Unit - Comisión Nacional de los Mercados y la Competencia (Spain)

Technological Innovation and Competition in the Financial Sector in Portugal

Ana Sofia Rodrigues | Chief Economist - Autoridade da Concorrência (Portugal)

Recent enforcement activities in digital markets in Hungary

Nóra Váczi | Member of the Competition Council - Gazdasági Versenyhivatal (Hungary)

Antitrust enforcement in digital markets: latest activities in Poland

Artur Szmigielski |  Antitrust expert- Urzędu Ochrony Konkurencji i Konsumentów (Poland)



Catriona Hatton |Managing Partner at Baker Botts in Brussels




As spaces are limited, we would appreciate your early reply. Please register at

We hope you can join us for what will be a lively and engaging discussion.


June 7, 2018 | Permalink | Comments (0)

Challenges and Pitfalls in Cartel Policy and Fining

Boyer, Marcel ; Faye, Anne Catherine ; and Kotchoni, Rachidi study Challenges and Pitfalls in Cartel Policy and Fining.

ABSTRACT: We analyze significant challenges and pitfalls faced by antitrust authorities in the implementation of competition policies particularly against naked cartels and propose measures principled in economic theory to circumvent these issues. We review leniency programs in different jurisdictions, the private versus public control of cartels, as well as the determination of cartel fines and other punishment instruments. Regarding cartel fines, we first discuss the sometimes-conflicting objectives of restitution and deterrence, then the economic-based versus legal- and proportional-based punishment. Moreover, we assess the proper modeling of cartel dynamics including the probability of detection and conviction, the relevant cartel duration, and the estimation of but-for prices and cartel overcharges.

June 7, 2018 | Permalink | Comments (0)

Wednesday, June 6, 2018

Overcharged: Why Americans Pay Too Much for Health Care - Conference June 8, 2018 

Overcharged: Why Americans Pay Too Much for Health Care

June 8, 2018 
9:00AM to 1:00PM EDT
Hayek Auditorium, Cato Institute

Why is America’s health care system so dysfunctional and expensive? Why do hospitalized patients receive bills laden with inflated charges that come out of the blue from out-of-network providers, or that demand payment for services that weren’t delivered? Why do we pay $600 for EpiPens that contain a dollar’s worth of medicine? Why is more than $1 trillion—one out of every three dollars that passes through the system—lost to fraud, wasted on services that don’t help patients, or otherwise misspent?

In a new book published by the Cato Institute, Overcharged: Why Americans Pay Too Much for Health Care, Cato adjunct scholars Charles Silver and David Hyman answer these questions. Overcharged shows how government replaces competition and consumer choice with monopolies and third-party payment, making America’s health care system as expensive as possible.

At this special book conference, the authors, joined by other national health care experts, will lay bare the root causes of our health care system’s ills and show how the health care sector will become more efficient and pro-consumer when it is subjected to the competitive forces that apply to the rest of the economy. Prices will fall, quality will improve, and medicine will become more patient-friendly when consumers take control of their health care dollars and exert pressure from below.

To see how this transformation will work, please join us in person or online to learn about the potent “medicine” Overcharged prescribes.


9:00 – 10:20AM Panel 1 – Misdiagnosis: The Problems Congress Has Ignored

  • David A. Hyman, Coauthor, Overcharged; Professor of Law, Georgetown University; Adjunct Scholar, Cato Institute
  • Andy Slavitt, Chairman, United States of Care; Former Acting Administrator, Centers for Medicare and Medicaid Services
  • Gail Wilensky, Senior Fellow, Project HOPE; Former Administrator, Health Care Financing Administration
  • Moderator: Elisabeth Rosenthal, Editor-in-Chief, Kaiser Health News; Author, An American Sickness
10:20 – 10:35AM Break
10:35 – 11:55AM Panel 2 – Mistreatment: Why Obamacare Failed and What Will Succeed

  • Charlie Silver, Coauthor, Overcharged; Professor of Law, University of Texas-Austin School of Law
  • John E. McDonough, Professor of Public Health Practice, Harvard T.H. Chan School of Public Health
  • Moderator: Megan McArdle, Columnist, Washington Post
11:55AM – 12:15PM Break
12:15 – 1:15PM Keynote Address

  • Eric D. Hargan, Deputy Secretary, U.S. Department of Health and Human Services
  • Introduction by Michael F. Cannon, Director of Health Policy Studies, Cato Institute
1:15 – 2:00PM Lunch

If you can’t make it to the event, you can watch it live online at and join the conversation on Twitter using #OverchargedBook

June 6, 2018 | Permalink | Comments (0)

Advertising’s Long-Term Impact on Brand Price Elasticity Across Brands and Categories

Vanhuele, Marc ; Ataman, Berk ; Pauwels, Koen ; Srinivasan, Shuba study Advertising’s Long-Term Impact on Brand Price Elasticity Across Brands and Categories.

ABSTRACT: Advertising often aims at creating and reinforcing brand differentiation, which should translate into reduced price competition. Currently unknown are the boundary conditions for long-term advertising benefits, the route through which advertising effects materialize, and the role of competitive advertising in the category. The authors develop a Hierarchical Dynamic Linear Model that links own and others’ advertising in the category to brand price elasticity directly and indirectly through their impact on own and competitive mindset metrics. The model accommodates dynamic dependencies in mindset metrics, controls for endogeneity in marketing, captures competitive reactions and performance feedback in marketing, and explains cross-sectional variation as a function of brand and category characteristics. Model estimation on seven years of data for 350 brands in 39 categories shows that both own and all competitive advertising in the category lower price sensitivity for the average brand, both directly and through advertising awareness. The attenuation of price sensitivity is more pronounced for niche brands in complex and more expensive categories, with higher concentration and purchase frequency. A financial simulation based on the estimates shows that while the price elasticity effect is positive and substantial for high-price brands, it hurts the advertising returns for low-price brands.

June 6, 2018 | Permalink | Comments (0)

A general model of price competition with soft capacity constraints

Marie-Laure Cabon-Dhersin (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - URN - Université de Rouen Normandie - NU - Normandie Université); and Nicolas Drouhin (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique) discuss A general model of price competition with soft capacity constraints.

ABSTRACT: We propose a general model of oligopoly with firms relying on a two factor production function. In a first stage, firms choose a certain fixed factor level (capacity). In the second stage, firms compete on price, and adjust the variable factor to satisfy all the demand. When the factors are substitutable, the capacity constraint is " soft " , implying a convex cost function in the second stage. We show that there is a unique equilibrium prediction in pure strategies, whatever the returns to scale, characterized by a price that increases with the number of firms up to a threshold. The main propositions are established under the general assumption that the production function is quasi-concave but the paper provides a general methodology allowing the model to be solved numerically for special parametrical forms.

June 6, 2018 | Permalink | Comments (0)

Dynamic competition in deceptive markets

JOHNEN, Johannes (CORE, Université catholique de Louvain) theorizes about Dynamic competition in deceptive markets.

ABSTRACT: In many deceptive markets, firms design contracts to exploit mistakes of naive consumers. These contracts also attract less profitable sophisticated consumers. I study such markets when firms compete repeatedly and gather usage data about their customers which is informative about the likelihood of a customer being sophisticated. I show in a benchmark model that firms do not benefit from private information in this setting when all consumers are rational. I find that in sharp contrast to a model with only rational consumers, this customer information mitigates competition and is of great value to its owner despite intense competition. I discuss several implications of the value of customer information on naiveté. Private information on customers’ sophistication induces profits that are bell-shaped in the share of naive consumers. Firms prefer an even mix of both customer types. I also show that if firms can educate (some) naives about hidden fees, competition is already mitigated when firms compete for customers with initially symmetric information. I analyze a policy that discloses customer information to all firms and thereby increases consumer surplus. I discuss how the UK governments’ midata program might induce crucial aspects of this policy, and illustrate the obustness of results through several extensions.

June 6, 2018 | Permalink | Comments (0)

Salience and Online Sales: The Role of Brand Image Concerns

Markus Dertwinkel-Kalt and Mats Köster investigate Salience and Online Sales: The Role of Brand Image Concerns.

ABSTRACT: We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers’ ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer’s attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions - a quality or a participation distortion - can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account.

June 6, 2018 | Permalink | Comments (0)

Tuesday, June 5, 2018

Multiproduct Intermediaries and Optimal Product Range

Rhodes, Andrew ; Watanabe, Makoto and Zhou, Jidong examine Multiproduct Intermediaries and Optimal Product Range.

ABSTRACT: This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store traffic, and at the same time earns pro?t mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive profit, including in situations where it does not improve efficiency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.

June 5, 2018 | Permalink | Comments (0)

The intensity of judicial review in complex economic matters—recent competition law judgments of the court of justice of the EU

José Luís da Cruz Vilaça describes The intensity of judicial review in complex economic matters—recent competition law judgments of the court of justice of the EU.

ABSTRACT: Judges are faced with great challenges when judicial review is carried out in a complex economic environment, such as that concerning the application of competition law, as they are required to turn economic theories into clear and predictable legal criteria. Traditionally, the Court of Justice has taken a careful approach as to the scope and intensity of its own review of the Commission’s decisions in complex economic matters. As more sophisticated economic analysis has been developed to fully grasp the impact of the conduct of undertakings on the market, the EU courts have progressively felt the need to strengthen their scrutiny in competition cases. The recent judgment in Intel is an important step, albeit limited, in this regard. Notwithstanding, the Court of Justice has always been most reluctant to replace its own assessment of facts for the complex assessments of an economic nature made by the Commission, and has never withdrawn from the strict conception of its powers of review on appeal.

June 5, 2018 | Permalink | Comments (0)

The Future of Article 102 TFEU after Intel

Pablo Ibáñez Colomo, LSE writes about The Future of Article 102 TFEU after Intel.

ABSTRACT: No judgment in the past decade has been awaited as eagerly as the appeal ruling in Intel. There is something surprising about the expectation created around the case. The legal issues that sparked commentators’ interest when the General Court judgment came out in 2014 had seemingly been settled for decades. The prima facie prohibition of exclusive dealing and loyalty rebates under Article 102 TFEU has indeed been reiterated many times over the years. In spite of this inauspicious background, the Intel judgment managed to surprise commentators and stakeholders.

June 5, 2018 | Permalink | Comments (0)

The Power of the Crowd in the Sharing Economy

Michal Gal, University of Haifa, explores The Power of the Crowd in the Sharing Economy.

ABSTRACT:  Much has been written on the ability of sharing platforms to affect market conditions. In this research we focus on another piece of the puzzle, which is often overlooked but can play a significant role in shaping market structure and conduct: the users of the platform- whether suppliers or consumers (hereinafter jointly or severally: “the crowd”). As will be shown, the power of the crowd can both positively and negatively affect social welfare. Accordingly, this paper seeks to recognize the effects of crowd power and to identify both market-based as well as regulatory solutions to increase its welfare-increasing qualities, while reducing its negative ones. 

To do so, the study develops in a three stages. The first part explores the welfare effects of the sharing economy on the crowd. This serves as a basis for the second part, which focuses on the role of the crowd in shaping sharing platform markets. The third part then explores the potential role, as well as the limitations, of regulation in ensuring that crowd actions increase welfare. As will be shown, the current legal framework which regulates crowd actions might limit the realization of some of the potential positive effects of social platforms. In particular, new thinking might be needed with regard to rules regulating the use of crowd power to counteract a dominant sharing platform’s market power.

June 5, 2018 | Permalink | Comments (0)

Monday, June 4, 2018

Optimizing Private Antitrust Enforcement in Health Care

Anne Helm, University of California Hastings College of the Law is Optimizing Private Antitrust Enforcement in Health Care.

ABSTRACT:Americans are paying too much for health care services and insurance, in large part due to insufficiently competitive markets. Waves of consolidation have fortified providers and insurers with market power, resulting in higher prices and lower quality for consumers. As antidotes, advocates have proposed various legislative, regulatory, and enforcement solutions. Yet, unlike public antitrust enforcement, private antitrust enforcement is either not mentioned or criticized as sour grapes from competitors or a money grab by consumers. Instead of ignoring or bashing private litigation, those looking to address the health care pricing crisis in the United States should be looking to optimize it. Effective private enforcement can restore competition, deter antitrust violations, and compensate victims in the markets for health care services and insurance. For plaintiffs, the key to optimizing private antitrust enforcement is overcoming the unavoidable challenges in litigating these cases-from satisfying pleading standards and establishing standing, to defining relevant markets. This article explains the key obstacles involved in these cases and tracks recent and current plaintiffs whose experiences provide insight.  

June 4, 2018 | Permalink | Comments (0)