Tuesday, July 5, 2016
Masao Nakaya (Graduate School of Economics, Osaka University) ; Fumiaki Nakamura (Graduate School of Economics, Osaka University) ; Xiaodan Wei (Graduate School of Economics, Osaka University) ; Koichi Nakagawa (Graduate School of Economics, Osaka University) provide an Overview of acquisitions and divestitures in semiconductor industry 2001-2014.
ABSTRACT: This study shows the overview of the utilizations of mergers, acquisitions and divestitures in semiconductor industry in 2001- 2014. Merger, Acquisition and divestiture were used as standard management tools by every company in the semiconductor industry in 21st century. They used those methods to overcome the risk of technological or market change. From the fundamental analysis of the panel data, we find that mergers, acquisitions and divestitures brought somewhat good impact on financial performance. Additionally we achieved some case analyses to get the in-depth understandings of the effect of acquisitions and divestitures by semiconductor companies.
Monday, July 4, 2016
W Lam (Liege) examines Competiton in the Market for Flexible Resources: an application to cloud computing.
ABSTRACT: This paper considers firms’ incentives to invest in local and flexible resources when demand is uncertain and correlated. Before demand is realized, two firms invest in their local capacity, and provider(s) of flexible resources invest in their capacity. After demand is realized, firms make their investment decision in flexible resource. I find that market power of the monopolist providing flexible resources distorts investment incentives, while competition mitigates them. The extent of improvement depends critically on demand correlation and the cost of capacity: under social optimum and monopoly, if the flexible resource is cheap, the relationship between investment and correlation is positive, and if it is costly, the relationship becomes negative; under duopoly, the relationship is positive.
Saturday, July 2, 2016
A number of the most downloaded law scholars of the past year, as measured by SSRN, are antitrust experts (even if in some cases antitrust is not their primary field):
Rank Name Downloads
3. Lemley, Mark A. 16,835
10 Evans, David S. 10,351
14 Geradin, Damien 8,508
23 Hovenkamp, Herbert J. 6,911
43 Wu, Tim 5,794
48 Wright, Joshua D. 5,553
76 Elhauge, Einer R. 4,460
85 Yoo, Christopher S. 4,224
89 Carrier, Michael A. 4,119
100 Sokol, D. Daniel 3,858
Aviv Nevo just gave a keynote at the CRESSE conference on the Economics of Internet Traffic Management.
As of yesterday, Aviv has a new appointment at Wharton. From the Penn press release, Nevo is:
A pioneer in the use of empirical data to analyze consumer behavior, Nevo will be the George A. Weiss and Lydia Bravo Weiss University Professor, with appointments in the Department of Economics in theSchool of Arts & Sciences and the Department of Marketing in the Wharton School.
“Aviv Nevo is one of the world’s leading scholars of industrial organization, whose innovative use of data in analyzing consumer behavior has helped revolutionize economics and marketing,” said Penn President Amy Gutmann. “Aviv is a superb teacher and path-breaking econometrician whose work in the academy and in government truly exemplifies Penn’s commitment to harnessing the tools and perspectives of multiple disciplines to understand and address pressing real-world questions.”
I am sure that Aviv's parents are very proud of him.
Friday, July 1, 2016
This book made for an interesting read. It is not about antitrust but those interested in retail issues (or pastrami or corned beef on rye) should enjoy it.
Pastrami on Rye An Overstuffed History of the Jewish Deli by Ted Merwin (NYU Press 2015).
For much of the twentieth century, the New York Jewish deli was an iconic institution in both Jewish and American life. As a social space it rivaled—and in some ways surpassed—the synagogue as the primary gathering place for the Jewish community. In popular culture it has been the setting for classics like When Harry Met Sally
ABSTRACT: This article presents a model to analyze consumer welfare, price, and competition in a three-way market among consumers, medical providers, and insurers. While insurers compete with each other for customers, they also act as collective bargaining agents on behalf of consumers in determining the equilibrium price of health care with providers. The entry of an additional insurer thus has contradictory effects on welfare, reducing premiums through competition but increasing price through reduced bargaining power of incumbent insurers. Moreover, the more favorable contracts allow consumers to purchase care more often, shifting out the demand curve for care and increasing price.
Thursday, June 30, 2016
Ludovic Alexandre Julien has thoughts On Noncooperative Oligopoly Equilibrium in the Multiple Leader-Follower Game.
ABSTRACT: In this paper, we provide new proofs of existence and uniqueness of a Stackelberg market equilibrium for a multiple leader-follower noncooperative oligopoly model in which heterogeneous firms compete on quantities. To this end, we consider a two-step game of perfect and complete information in which many leaders interact strategically with many followers. The Stackelberg market equilibrium constitutes a pure strategy subgame perfect Nash equilibrium of this game. The existence (and uniqueness) problem is complexified in this framework since strategic interactions occur within each partial game but also between both partial games through sequential decisions. Then, to prove existence, we notably provide a new procedure to determine (the conditions under which) the optimal behavior of the followers (may be written) as functions of the leaders'strategy profile only. Some examples outline our procedure and discuss our assumptions.
Eric van Damme and Jun Zhou study The dynamics of leniency application and the knock-on effect of cartel enforcement.
ABSTRACT: The authors study the timing of leniency applications using a novel application of multi-spell discrete-time survival analysis for a sample of cartels prosecuted by the European Commission between 1996 and 2014. The start of a Commission investigation does not affect the rate by which conspirators apply for leniency in the market investigated, but increases the rate of application in separate markets in which a conspirator in the investigated market also engaged in collusion. The revision of the Commission’s leniency programme in 2002 increased the rate of pre-investigation applications. Our results shed light on enforcement efforts against cartels and other forms of
ABSTRACT: The purpose of this paper is to provide a comparison of three types of competition in a differentiated industry: Cournot, Bertrand, and monopolistic competition. This is accomplished in an economy involving one sector and a population of consumers endowed with separable preferences and a given number of labor units. When firms are free to enter the market, monopolistically competitive firms charge lower prices than oligopolistic firms, while the mass of varieties provided by the market is smaller under the former than the latter. If the economy is sufficiently large, Cournot, Bertrand and Chamberlin solutions converge toward the same market outcome, which may be a competitive or a monopolistically competitive equilibrium, depending on the nature of preferences
Torben Stuhmeier explores Competition and corporate control in partial ownership acquisitions.
ABSTRACT: Competition authorities have a growing interest in assessing the effects of partial ownership arrangements. We show that the effects of such agreements on competition and welfare depend on the intensity of competition in the market and on the firms' governance structure. When assessing the effects of partial ownership, competition policy has to consider both the financial interest and level of control of the acquiring firm in the target firm.
Wednesday, June 29, 2016
Christiaan Behrens (VU University Amsterdam) and Mark Leijsen (VU University Amsterdam) are Measuring Competition Intensity; An Application to Air/HSR Transport Markets.
ABSTRACT: We develop a method to measure the intensity of competition between ﬁrms. Our method, which we call the Best Response Measure (BRM), is related to the conduct parameter method, but avoids the main problems associated with that method. The BRM relies on a very general framework and limited data requirements. Moreover, we show that it provides valuable information in determining the relevant market. We illustrate how the BRM can be used in markets with imperfect substitutes and apply the method to aviation markets in the North Sea area. This also enables us to establish to what extent the high speed rail link between London and the European mainland aﬀects the supply by air carriers.
Brian Stacey explores Airline Price Discrimination.
ABSTRACT: Price discrimination enjoys a long history in the airline industry. Borenstein (1989) discusses price discrimination through frequent flyer programs from 1985 as related to the Piedmont-US Air merger, price discrimination strategies have grown in size and scope since then. From Saturday stay over requirements to varying costs based on time of purchase, the airline industry is uniquely situated to enjoy the fruits of price discrimination.
Xuejuan Su (University of Alberta, Department of Economics) asks Have Customers Benefited from Electricity Retail Competition?
ABSTRACT: Compared to traditional cost-of-service (COS) regulation, electricity retail competition may lead to lower costs but higher markups. Thus, the net effect on electricity retail prices is ambiguous. This paper uses a difference-in-difference approach to estimate the impact. The results suggest that in restructured states, only residental customers have benefited from significantly lower prices but not commercial or industrial customers. Furthermore, this benefit is transitory and disappears in the long run. Overall, retail compettion does not seem to deliver lower electricity prices to retail customers across the board or over time.
ABSTRACT: We investigate the effects of alternative open access regimes on market performance. In particular, by means of an economic laboratory experiment we compare the market outcomes under unregulated wholesale competition, under a price-fixing rule (where firms must maintain their wholesale price for a fixed period of time), and under a margin squeeze rule (where the retail price of integrated firms must exceed their wholesale price). Our analysis suggests that wholesale and retail prices are substantially reduced by the introduction of a price-fixing rule at the upstream level compared to the unregulated scenario. In contrast, we do not find evidence that a margin squeeze regulation reduces retail market prices. In fact, while such a rule benefits the reselling firm by allowing for a viable profit margin, prices for consumers tend to be even higher than in the unregulated case.
Tuesday, June 28, 2016
Hassan Afrouzi (The University of Texas at Austin) analyzes Endogenous firm competition and the cyclicality of markups.
ABSTRACT: The cyclicality of markups is crucial to understanding the propagation of shocks and the size of multipliers. I show that the degree of inertia in the response of output to shocks can reverse the cyclicality of markups within implicit collusion and customer-base models. In both classes of models, markups follow a forward looking law of motion in which they depend on firms' conditional expectations over stochastic discount rates and changes in output, implying that auxiliary assumptions that affect the inertia of output can potentially reverse cyclicality of markups in each of these models. I test this common law of motion with data for firms' expectations from New Zealand and find that firms' markup setting behavior is more consistent with implicit collusion models than customer base models. Calibrating an implicit collusion model to the U.S. data, I find that markups are procyclical if there is inertia in the response of output to shocks, as commonly fou! nd in the data.
David Sundstrom (Department of Economics, Umea University) theorizes about The Competition Effect in a Public Procurement Model: An error-in-variables approach.
ABSTRACT: Auction theory suggests that as the number of bidders (competition) increases, the sizes of the participants’ bids decrease. An issue in the empirical literature on auctions is which measurement(s) of competition to use. Utilizing a dataset on public procurements containing measurements on both the actual and potential number of bidders I find that a workhorse model of public procurements is best fitted to data using only actual bidders as measurement for competition. Acknowledging that all measurements of competition may be erroneous, I propose an instrumental variable estimator that (given my data) brings about a competition effect bounded by those generated from models using the actual and potential number of bidders, respectively. Also, some asymptotic results are provided for non-linear least squares estimators obtained from a dependent variable transformation model.
ABSTRACT: We provide a new legal perspective for the antitrust analysis of margin squeeze conducts. Building on recent economic analysis, we explain why margin squeeze conducts should solely be evaluated under adjusted predatory pricing standards. The adjustment corresponds to an increase in the cost benchmark used in the predatory pricing test by including opportunity costs due to missed upstream sales. This can reduce both the risks of false-positives and false-negatives in margin squeeze cases. We justify this approach by explaining why classic arguments against above-cost predatory pricing typically do not hold in vertical structures where margin squeezes take place and by presenting case law evidence supporting this adjustment. Our approach can help to reconcile the divergent US and EU antitrust stances on margin squeeze.