Antitrust & Competition Policy Blog

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

Tuesday, July 5, 2016

Overview of acquisitions and divestitures in semiconductor industry 2001-2014

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.

July 5, 2016 | Permalink | Comments (0)

Monday, July 4, 2016

Competiton in the Market for Flexible Resources: an application to cloud computing

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.

July 4, 2016 | Permalink | Comments (0)

Saturday, July 2, 2016

SSRN Most Downloaded in the Last 1 year (as of July 1, 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

July 2, 2016 | Permalink | Comments (0)

Aviv Nevo is Amazing

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:

 

[T]he University of Pennsylvania’s 17th Penn Integrates Knowledge University Professor, effective July 1.  

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.

July 2, 2016 | Permalink | Comments (0)

Friday, July 1, 2016

The Economics of Competition Policy for Economists 6 - 7 October 2016

BOOK NOW...
The Economics of
Competition Policy for Economists


6 - 7 October 2016
etc.venues, The Hatton, London, EC1N 8HN

Do you have a good background in microeconomics but want to learn more about practical competition policy? Then this course could be for you. Now in its third year, this highly successful two-day course is aimed at those who are relatively new to practical competition policy and will provide you with an introduction into competition policy by speakers from both the private and public sector with with strong practical experience of competition policy work from both the private and public sector.

With a focus on standard antitrust, including the assessment of anti-competitive agreements, mergers and abuse of dominance, each of the eight sessions will involve a mix of presentation and interactive work to provide you with practical analytical tools to be used when back in the workplace. 

CLICK HERE TO REGISTER
20% early bird discount if booked before 1 August 2016
 
Speakers include...
Matthew Bennett, Charles River Associates
Kate Collyer, Competition and Markets Authority
Amelia Fletcher, CCP
Morten Hviid, CCP 
Matthew Johnson, Oxera
David Parker, Frontier Economics
Laura Phaff, Compass Lexecon
Adrian Majumdar, RBB Economics.

A full programme will be available on our website soon. 
Rates...
Private Sector £950 + VAT 
Public Sector/Academia £750 + VAT
Course is limited to 40 attendees maximum
Places are transferrable
 
For more information please contact us on...
E: ccp@uea.ac.uk     
T: +44 (0) 1603 593715    
W: competitionpolicy.ac.uk

July 1, 2016 | Permalink | Comments (0)

Pastrami on Rye An Overstuffed History of the Jewish Deli

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).

 

Winner, 2015 National Jewish Book Award presented by the Jewish Book Council

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
. And today, after a long period languishing in the trenches of the hopelessly old-fashioned, it is experiencing a nostalgic resurgence.
 
Pastrami on Rye is the first full-length history of the New York Jewish deli. The deli, argues Ted Merwin, reached its full flowering not in the immigrant period, as some might assume, but in the interwar era, when the children of Jewish immigrants celebrated the first flush of their success in America by downing sandwiches and cheesecake in theater district delis. But it was the kosher deli that followed Jews as they settled in the outer boroughs of the city, and that became the most tangible symbol of their continuing desire to maintain a connection to their heritage. Ultimately, upwardly mobile American Jews discarded the deli as they transitioned from outsider to insider status in the middle of the century. Now contemporary Jews are returning the deli to cult status as they seek to reclaim their cultural identities. 
 
Richly researched and compellingly told, Pastrami on Rye gives us the surprising story of a quintessential New York institution.

July 1, 2016 | Permalink | Comments (0)

With his mastery of out-of-control vehicles, only Keanu can save the UK

I am not kidding - The Guardian has run an article that Neo from The Matrix (aka Keanu Reeves) can save the UK from Brexit.

July 1, 2016 | Permalink | Comments (0)

Competition Among Insurers and Consumer Welfare

Matthew N. White (Department of Economics, University of Delaware) analyzes Competition Among Insurers and Consumer Welfare.

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.

July 1, 2016 | Permalink | Comments (0)

Thursday, June 30, 2016

On Noncooperative Oligopoly Equilibrium in the Multiple Leader-Follower Game

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. 

June 30, 2016 | Permalink | Comments (0)

The dynamics of leniency application and the knock-on effect of cartel enforcement

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

June 30, 2016 | Permalink | Comments (0)

Cournot, Bertrand or Chamberlin: Toward a reconciliation

Parenti, Mathieu ; Sidorov, Alexander ; Thisse, Jacques-Francois ; Zhelobodko, Evgeny examine Cournot, Bertrand or Chamberlin: Toward a reconciliation.

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

June 30, 2016 | Permalink | Comments (0)

Competition and corporate control in partial ownership acquisitions

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.

June 30, 2016 | Permalink | Comments (0)

Wednesday, June 29, 2016

Measuring Competition Intensity; An Application to Air/HSR Transport Markets

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.

June 29, 2016 | Permalink | Comments (0)

Airline Price Discrimination

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.

June 29, 2016 | Permalink | Comments (0)

Navigating the New Matchmaker Economy: The Role of Antitrust and Regulation - July 28, 2016

 

Navigating the New Matchmaker Economy:
The Role of Antitrust and Regulation

July 28 - 12pm-2pm
George Washington Competition Law Center
George Washington Law School- FCC Room
2000 H Street, N.W, Washington, DC 20052

Keynote Speakers


David S. Evans
Co-Author of
Matchmakers: The New Economics of Multisided Platforms, Harvard Business Review Press, May 2016


Terrell McSweeny
Commissioner, Federal Trade Commission

 
Jonathan Sallet
General Counsel, Federal Communications Commission

Edward Black
President, Computer and Communications Industry Association
 

Scott Sher
Partner, Wilson Sonsini Goodrich & Rosati

Moderated by:


William Kovacic
Professor, George Washington Law School and Non-Executive Director, Competition and Markets Authority
Many of the most dynamic public companies, from Alibaba to Facebook to Visa, and the most valuable start-ups, such as Airbnb and Uber, are matchmakers that connect one group of customers with another group of customers. Economists call matchmakers multisided platforms because they provide physical or virtual platforms for multiple groups to get together. Dating sites connect people with potential matches, for example, and ride-sharing apps do the same for drivers and riders.
 
Although matchmakers have been around for millennia, they’re becoming more and more popular—and profitable—due to dramatic advances in technology, and a lot of companies that have managed to crack the code of this business model have become today’s power brokers.  Three of the fifth largest firms by market cap are matchmakers as are 7 of the 10 largest unicorns. And so are all of the “gig” and “sharing” companies.
 
Today, we are increasingly living in the Matchmaker Economy. 
 
So are antitrust authorities and sectoral regulators.  They increasingly encounter matters involving matchmakers.  Some of these matters involve new business models, disruptive innovation, and the collision of new and old industries?  Some also involve platforms tat have quickly achieved massive reach and influence. What—if any—issues do these multisided platforms raise and what—in any—changes in analytical approaches do they require? 
 
At this luncheon event, Dr. Evans, who has done pioneering work on the new economic science of multisided platforms will provide an overview of the new matchmaker economy based on his recent book, coauthored with Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms.  The book has been featured in The New York Times, the Wall Street Journal and theEconomist, and as a Hot New Release and Best Seller on Amazon. 
 
Four leading experts on antirust and regulation will then give brief presentations:
Terrell McSweeny, Commissioner, Federal Trade Commission
Jonathan Sallet, General Counsel, Federal Communications Commission
Edward Black, President, Computer & Communications Industry Association
Scott Sher, Partner, Wilson Sonsini Goodrich & Rosati
 
Following the four presentations, Professor William Kovacic, Former Chairman of the Federal Trade Commission will moderate a panel discussion with the presenters.
Supported by:

June 29, 2016 | Permalink | Comments (0)

Have Customers Benefited from Electricity Retail Competition?

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.

June 29, 2016 | Permalink | Comments (0)

Upstream Competition and Open Access Regimes: Experimental Evidence

Horstmann, Niklas ; Kramer, Jan ; Schnurr, Daniel offer Upstream Competition and Open Access Regimes: Experimental Evidence.

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.

June 29, 2016 | Permalink | Comments (0)

Tuesday, June 28, 2016

Endogenous firm competition and the cyclicality of markups

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.

June 28, 2016 | Permalink | Comments (0)

The Competition Effect in a Public Procurement Model: An error-in-variables approach

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.

June 28, 2016 | Permalink | Comments (0)

Margin squeeze: An above-cost predatory pricing approach

Gaudin, Germain ; Mantzari, Despoina offer Margin squeeze: An above-cost predatory pricing approach.

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.

June 28, 2016 | Permalink | Comments (0)