Wednesday, May 10, 2017
EU retail roaming regulation triggers competition mechanisms of wholesale roaming markets that make wholesale prices competitive
Deniau, Philippe ; Jaunaux, Laure ; Lebourges, Marc writes EU retail roaming regulation triggers competition mechanisms of wholesale roaming markets that make wholesale prices competitive.
ABSTRACT: The European Commission (EC) draft Regulation (2016)2 on wholesale roaming market proposes a massive decrease of the regulated roaming wholesale price caps for data with a drop from €5ct/MB to €0.85 ct/MB to enable the abolition of retail roaming surcharges in Europe by 15 June 2017. However, according to both the “TSM” Regulation text (2015/2120 25th November 2015) itself which imposes the implementation of Roaming Like At Home (RLAH) in Europe and to the decision of the European Court of Justice upholding the first European roaming regulation (ECJ C-58/08 8 June 2010), a wholesale roaming regulation can be justified in parallel of retail regulation only in case of market failure in the wholesale market and in order to prevent the existence of competitive distortions between mobile operators on the internal market. Therefore, wholesale roaming markets regulation should only address identified competitiveness issues. This paper deals with the question of the competitiveness of the wholesale roaming market regarding two angles: the existence of competitive mechanisms and incentives in wholesale roaming markets and the average level of wholesale roaming market prices in comparison with the corresponding level of full production costs. It shows that wholesale roaming markets exhibit competition mechanisms and incentives triggered by roaming volume growth resulting from the perspective of RLAH retail regulation. It also shows that in 2015, the average level of wholesale roaming market prices in Europe is equivalent to the average level of wholesale roaming production costs. Therefore the wholesale roaming market is competitive. Strong regulatory intervention such as large decrease of wholesale roaming caps is neither justified nor proportionate, generates serious risk of distortion of visited markets and jeopardises investments in mobile networks.
Carletti, Elena ; Ongena, Steven ; Siedlarek, Jan-Peter ; Spagnolo, Giancarlo assess The Impact of Merger Legislation on Bank Mergers.
ABSTRACT: We study the impact on bank merger activity of the strengthening in merger control legislation introduced in Europe between 1989 and 2004. We find that strengthening merger control increases the abnormal returns on bank target stocks in the days around the merger announcement by 7 percentage points relative to before the new legislation.We discuss several potential explanations for this effect of the change in legislation by studying changes in merger characteristics. We find a weak increase in the pre-merger profitability of target banks, a decrease in the size of acquirers and a decrease in the share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rival banks in the country appear unaffected. The evidence is consistent with legislation changes leading to transactions being undertaken that are more profitable and more pro-competitive.
Tuesday, May 9, 2017
Gugler, Klaus ; Heim, Sven and Liebensteiner, Mario explain Non-Sequential Search, Competition and Price Dispersion in Retail Electricity.
ABSTRACT: We investigate the impact of consumer search and competition on pricing strategies in Germany's electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer search. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-González (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants. (authors' abstract)
Lábaj, Martin ; Morvay, Karol ; Silanic, Peter ; Weiss, Christoph ; Yontcheva, Biliana explore Market Structure and Competition in Transition: Results from a Spatial Analysis.
ABSTRACT: The present paper provides first microlevel (indirect) empirical evidence on changes in the determinants of firm profitability, the role of fixed and sunk costs, as well as the nature of competition for a transition economy. We estimate size thresholds required to support different numbers of firms for four retail and professional service industries in a large number of geographic markets in Slovakia. The three time periods in the analysis (1995, 2001 and 2010) characterize different stages of the transition process. Specific emphasis is given to spatial spill-over effects between local markets. Estimation results obtained from a spatial ordered probit model suggest that entry barriers have declined considerably (except for restaurants) and the intensity of competition has increased. We further find that demand spill-overs and/or the effects associated with a positive correlation in unobservable explanatory variables seem to outweigh negative spill-over effects caused by competitive forces between neighboring cities and villages. The importance of these spatial spill-over effects differs across industries.
Manzano, Carolina and Vives, Xavier have written on Market Power and Welfare in Asymmetric Divisible Good Auctions.
ABSTRACT: We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders. Equilibrium is unique, and the relative market power of a group increases with the precision of its private information but declines with its transaction costs. In line with empirical evidence, we find that an increase in transaction costs and/or a decrease in the precision of a bidding group's information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A "stronger" bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic- has more market power and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payoff asymmetries. Market power and the deadweight loss may be negatively associated.
Hellwig, Michael and Hüschelrath, Kai ask When do firms leave cartels? Determinants and the impact on cartel survival.
ABSTRACT: We use a dataset of 615 firms which participated in 114 illegal cartels - convicted by the European Commission between 1999 and 2016 - to investigate the determinants of the duration of a firm's participation in a cartel. Applying a Weibull proportional hazard model with a particular focus on the impact of internal and external time-varying determinants, we find that firms show an increased probability to leave a cartel if prior exits occurred as well as in periods of high demand growth. However, we find a reduced exit probability in situations of prior entries to the cartel or in periods of high interest rates. Additional estimations on the cartel level further suggest that firm exits increase the probability of a cartel breakdown substantially.
Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Anti-Monopoly Commission of the State Council’s Anti-Monopoly Guidelines Against Abuse of Intellectual Property Rights
Koren W. Wong-Ervin George Mason University, Scalia Law School - Global Antitrust Institute Douglas H. Ginsburg U.S. Court of Appeals for the District of Columbia Circuit; George Mason University - Antonin Scalia Law School, Faculty Bruce H. Kobayashi George Mason University - School of Law and Joshua D. Wright George Mason University - Antonin Scalia Law School, Faculty Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, Comment on the Anti-Monopoly Commission of the State Council’s Anti-Monopoly Guidelines Against Abuse of Intellectual Property Rights.
ABSTRACT: This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University in response to the Anti-Monopoly Commission of the State Council of the People's Republic of China’s public consultation on its draft Anti-Monopoly Guidelines Against Abuse of Intellectual Property Rights. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving intellectual property rights.
Monday, May 8, 2017
A stochastic frontier estimator of the aggregate degree of market power exerted by the U.S. beef and pork packing industries
Stavrakoudis, Athanassios ; Panagiotou, Dimitrios offer A stochastic frontier estimator of the aggregate degree of market power exerted by the U.S. beef and pork packing industries.
ABSTRACT: The objective of this study is to measure the amount of market power exercised by the U.S. red meatpacking industry using the recently developed stochastic frontier estimator of market power. The aggregate degree of market power in both the input market (cattle and hogs) and the output market (beef and pork) is estimated using annual time series data for the period 1970- 2009. The empirical results reveal that the farm-to-wholesale price spread is 4.91% and 4.16% above the marginal processing costs, in the beef and pork packing industries, respectively. These findings indicate that rather a small percentage of the farm-to-wholesale price spread can be attributed to market power in both U.S. meat packing sectors.
Jun Honda discusses Intermediary Search for Suppliers in Procurement Auctions.
ABSTRACT: In many procurement auctions, entrants determine whether to participate in auctions accounting for their roles of intermediaries who search for the best (or the cheapest) input suppliers. We build on a procurement auction model with entry, combining with intermediary search for suppliers. The novel feature is that costs of bidders are endogenously determined by suppliers who strategically charge input prices. We show the existence of an equilibrium with price dispersion for inputs, generating cost heterogeneity among bidders. Interestingly, the procurement cost may rise as the number of potential bidders increases. (author's abstract)
Gil, Ricard ; Riera-Crichton, Daniel ; Ruzzier, Christian have written As Seen on TV: Price Discrimination and Competition in Television Advertising.
ABSTRACT: In this paper we examine the empirical relationship between price discrimination and competition in television advertising. While most empirical papers on the topic document a positive relationship, we find that price discrimination is negatively related to competition (as measured by the number of competing firms), a result that is consistent with conventional wisdom. Our results also show that only incumbent stations (unlike entrants) respond by engaging less in price discrimination when faced with a more competitive environment. Our evidence suggests that incumbents may use price discrimination as a strategic tool to accommodate entry - a strategy that has received scant attention in the existing entry literature.
Kevin M. Murphy and Ignacio Palacios-Huerta offer A Theory of Bundling Advertisements in Media Markets.
ABSTRACT: Watching TV and other forms of media consumption represent, after sleeping and working, the main activity that adults perform in developed countries. We present a dynamic theory of commercial broadcasting where the media trade utility-raising goods (programs, information, and services) with audiences in exchange for their exposure to advertisements (utility-decreasing bads), and where goods are otherwise free to the audience except for their opportunity cost of time. Goods and bads are dynamically arranged, and as such traded in an intertemporal bundle. No monetary transfers take place between media and audiences, and this barter exchange is not contractually sustained. We study this dynamic problem in a model that captures the central characteristics of how commercial media markets operate. The model is rich enough to account for a variety of disparate evidence in television, radio, print media and the web.
Friday, May 5, 2017
New Frontiers of Antitrust 2017 Concurrences Review Monday, June 26, 2017 from 8:30 AM to 7:00 PM (CEST) Paris, France
Registration & Continental breakfast
Frédéric Jenny | Chairman, OECD Competition Committee, Paris - President, International Committee Concurrences Review - Professor, Director of International Relations at ESSEC, Co-Director of the European Center for Law and Economics
Opening Keynote Speech
Marc van der Woude | Judge, Vice-President, General Court of the European Union, Luxembourg
09.45 - 11.15
Competition authorities: Towards more independence and prioritisation?
José María Marín Quemada | Chairman, National Commission for Markets and Competition, Madrid
Wouter Wils | Hearing Officer, European Commission, Brussels | Visiting Professor, King's College London
Eric Barbier de La Serre | Partner, Jones Day, Paris
Frank Maier-Rigaud | Professor, IÉSEG School of Management, Paris | Head of Competition Economics Europe, NERA, Berlin
Chairperson: Laurence Idot | Professor, University Paris II Panthéon-Assas - Member | Autorité de la concurrence, Paris | President, Scientific Committee Concurrences Review, Paris
11.30 - 13.00
Mergers and innovation: Do mergers foster innovation?
Andrea Coscelli | Acting Chief Executive, Competition & Markets Authority, London
Carles Esteva Mosso | Deputy Director-General for mergers, DG COMP, Brussels
Justus Haucap | Director, Institute for Competition Economics, Düsseldorf
Cristina Caffarra | Vice President, Head of European Competition Practice, CRA, Brussels/London
Chairperson: Isabelle de Silva | Chairperson, Autorité de la concurrence, Paris
14.30 - 16.00
State aid and tax ruling: Is there really a competition issue?
Gert-Jan Koopman | Deputy Director-General State aid, DG COMP, Brussels
Damien Neven | Professor, Graduate institute, Geneva - Senior Consultant, Compass Lexecon, Brussels
Jacques Derenne | Partner Sheppard Mullin Richter & Hampton, Brussels
Chairperson: Frédéric Jenny | Chairman, OECD Competition Committee, Paris
16.30 - 18.00
Exploring the politics of competition regulation: How political is competition law?
Cecilio Madero | Deputy Director-General Antitrust, DG COMP, Brussels
Kaarli Eichhorn | Global Executive Counsel - Competition Law & Policy, General Electric, Brussels
Mathew Heim | Vice President and Counsel, Qualcomm, London
David Spector | Professor, Paris School of Economics, Paris
Mélanie Thill-Tayara | Partner, Dechert, Paris
Chairperson: Robert McLeod | Co-Founder & Chief Executive Officer, MLex, Brussels
Concurrences PhD Awards 2017
Bonnet, Céline and Richards, Timothy offer Models of Consumer Demand for Differentiated Products.
ABSTRACT: Advances in available data, econometric methods, and computing power have created a revolution in demand modeling over the past two decades. Highly granular data on household choices means that we can model very specific decisions regarding purchase choices for differentiated products at the retail level. In this chapter, we review the recent methods in modeling consumer demand, and their application to problems in industrial organization and strategic marketing.
Brent Snyder is very good at his job in terms of prosecuting cartels. He also has a good sense that the current enforcement system can be improved. Vindication for something I wrote about back in 2013 was that in a talk yesterday as reported by GCR, Snyder discussed the need for additional carrots to get better cooperation and hence more optimal enforcement. Maybe DOJ Antitrust Compliance Guidelines could be next?
Mehlum, Halvor (Dept. of Economics, University of Oslo) offers Another model of sales. Price discrimination in a differentiated duopoly market.
ABSTRACT: Using a model of horizontal differentiation where a variety dimension is added to Hotelling's (1929) "linear city" duopoly model, I show that even when costs and demand are symmetric, price discrimination may be an equilibrium phenomenon. In the model each customer have a preferred variety and a preferred firm. They have perfect information about all prices and may be induced to switch variety and firm given a sufficient price difference. Price discrimination equilibrium exists when a sufficient fraction of consumers are elastic both with respect to variety and firm.
Jean-Baptiste Tondji offers Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D.
ABSTRACT: I consider the model of a differentiated duopoly with process R&D when goods are either substitute, complements or independent. I propose a non-cooperative two-stage game with two firms producing differentiated goods. In the first stage, firms decide their technologies and in the second stage, they compete in quantities or prices. I evaluate the social welfare within a framework of Cournot and Bertrand competition models with or without investment in research and development. I prove that the Cournot price can be lower than Bertrand price when the R&D technology is relatively inefficient; thus, Cournot market structure can generate larger consumer's surplus and welfare.
Thursday, May 4, 2017
Lexxion Publisher is pleased to present the recently launched CoRe – European Competition and Regulatory Law Review.
From the press release:
Together with the Managing Editors Robert Klotz (Sheppard Mullin) and Ben Van Rompuy (Leiden University/Vrije Universiteit Brussels) we have created a quarterly journal that focuses on important issues linked to competition and regulatory law within the EU, including public and private antitrust enforcement and merger control.
Issue 1/2017 shows our commitment to the highest standard of in-depth legal analysis and diversity of perspectives. The articles written by leading experts from public authorities and academia, subject to rigorous double peer review, discuss topical issues of today, such as rewards for competition compliance programmes and vertical restraints in online distribution. Top legal practitioners round up the comprehensive overview of developments with reports from EU Member States and case notes on recent judgments.
You can find more information on our website www.lexxion.eu/core or just contact us.
Raising Rivals' Costs Through Cartel Detection - Why Downstream Buyers Rather Face an Upstream Cartel than Downstream Competition
Georg Clemens, Compass Lexecon discusses Raising Rivals' Costs Through Cartel Detection - Why Downstream Buyers Rather Face an Upstream Cartel than Downstream Competition.
ABSTRACT: This paper analyses how the endogenous detection of an upstream cartel by a down-stream buyer allows the detecting firm to raise rivals' cost. We model a market with a vertical structure, where a stable all-inclusive cartel is operating in the upstream market which provides an input to a downstream duopoly. It is assumed that one downstream firm detects the cartel, while the existence of the cartel remains unknown to its competitor. The model shows that the detecting firm can strategically use its information advantage to decrease its own cost and thereby increase its rivals cost relatively to the detecting firms' cost.