Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Wednesday, July 16, 2014

Comparing Mobile Communication Service Prices Among Providers: A Hedonic Approach

Olivier Schoni (Friburg) and Lukas Seger (Friburg) are Comparing Mobile Communication Service Prices Among Providers: A Hedonic Approach.

ABSTRACT: The present article proposes a new approach to compare mobile communication service prices among different communications service providers. To this end, a hedonic model based on monthly phone bills is employed that relates billed amounts and the quantities of consumed mobile communication services. A linear hedonic regression model is separately estimated for each provider and then used to estimate prices. Laspeyres, Paasche, and Fisher double-imputed price indices are then used to compare prices across communications service providers on an aggregate level. The sensitivity of these indices in relation to the estimated hedonic functions is investigated using a generalized additive model.

July 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Postal-Sector Policy: From Monopoly to Regulated Competition and Beyond

Christian Jaag, Swiss Economics SE AG explores Postal-Sector Policy: From Monopoly to Regulated Competition and Beyond.

ABSTRACT: This paper discusses the main aspects of the competitive and regulatory state of the postal sector. It presents the different models for postal competition and regulation in the EU and the US and their history, together with their implications on regulation, with a focus on universal services and network access. While postal monopolies used to be the main source of funding for universal service obligations, the need for alternative funding sources after full liberalization has increased the interest of regulators and the public in knowing the cost of these obligations. In parallel, new means of electronic communication and consumer needs call the traditional scope of universal services into question. This paper outlines the economic rationale of current policies and directions for future postal regulation to strengthen the postal services’ commercial viability in a competitive age, while safeguarding their relevant cha! racteristics for the economy.

July 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Provider competition and over-utilization in health care

Jan Boone, Tilburg and Rudy Douven, CPB Netherlands Bureau for Economic Policy Analysis, Erasmus University Rotterdam and Harvard Medical School explain Provider competition and over-utilization in health care.

ABSTRACT: This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We show that CfM is optimal if the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payer’s and patients’ preferences are aligned.

July 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 15, 2014

Why are product prices in online markets not converging?

Takayuki Mizuno, University of Tokyo and Tsutomu Watanabe, University of Tokyo ask Why are product prices in online markets not converging?

ABSTRACT: Why are product prices in online markets dispersed in spite of very small search costs? To address this question, we construct a unique dataset from a Japanese price comparison site, which records price quotes offered by e-retailers as well as customers' clicks on products, which occur when they proceed to purchase the product. We find that the distribution of prices retailers quote for a particular product at a particular point in time (divided by the lowest price) follows an exponential distribution, showing the presence of substantial price dispersion. For example, 20 percent of all retailers quote prices that are more than 50 percent higher than the lowest price. Next, comparing the probability that customers click on a retailer with a particular rank and the probability that retailers post prices at a particular rank, we show that both decline exponentially with price rank and that the exponents associated with the ! probabilities are quite close. This suggests that the reason why some retailers set prices at a level substantially higher than the lowest price is that they know that some customers will choose them even at that high price. Based on these findings, we hypothesize that price dispersion in online markets stems from heterogeneity in customers' preferences over retailers; that is, customers choose a set of candidate retailers based on their preferences, which are heterogeneous across customers, and then pick a particular retailer among the candidates based on the price ranking.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers

Rosa-Branca Esteves (Universidade do Minho - NIPE) and Sofia Cerqueira (Universidade do Minho) analyze Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers.

ABSTRACT:  This paper is a first look at the dynamic effects of BBPD in a horizontally differentiation product market, where firms need to invest in advertising to generate awareness. When a firm is able to recognize customers with different purchasing histories, it may send them targeted advertisements with different prices. In comparison to no discrimination, it is shown that firms reduce their advertising efforts, charge higher first period prices and lower second period prices. In comparison to no discrimination, in contrast to the profit and consumer welfare results obtained under full informed consumers, it is shown that BBPD boosts industry profits and harms consumers.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

The Air Cargo Cartel: Lessons for Compliance

How can you find a good compliance program?  I spent hours (along with Howard Bergman) intervieiwing the Lufthansa team that uncovered the air cargo cartel.  This is a very capable group that believes in compliance and ethics and created an effective program that caught the air cargo cartel (leading to a rush to leniency in a number of jursidictions). We wrote this up as a case study of an anatomy of cartel compliance and detection. We think that it will have appeal to both practitioner and academic audiences.

Howard Bergman (George Mason) and D. Daniel Sokol (University of Florida) offer The Air Cargo Cartel: Lessons for Compliance.

ABSTRACT: Cartel enforcement and leniency are issues of increased academic attention. Most of the academic work in this area focuses on scholarship regarding formal modeling of leniency, empirical work, and analyses of broader legal theories, analytical trends and specific decisions. Scholarship has not focused on how leniency works in practice to detect wrongdoing and how robust and effective compliance programs may be used as a tool to take advantage of leniency. This chapter fills in the gap by offering a case study of an effective compliance program that uncovered what was at the time the largest ever international cartel. To do so, the authors undertook interviews with the legal team of Lufthansa, the leniency applicant in the air cargo conspiracy.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Product Upgrades and Posted Prices

Mustafa Dogan (Department of Economics, University of Pennsylvania) discusses Product Upgrades and Posted Prices.

ABSTRACT: We consider the dynamic pricing problem of a durable good monopolist with full commitment power, when a new version of the good is expected at some point in the future. The new version of the good is superior to the existing one, bringing a higher ow utility. If the arrival is a stationary stochastic process, then the corresponding optimal price path is shown to be constant for both versions of the good, hence there is no delay on purchases and time is not used to discriminate over buyers, which is in line with the literature. However, if the arrival of the new version occurs at a commonly known deterministic date, then the optimal price path may be decreasing over time, resulting in delayed purchases. For both stochastic and deterministic arrival processes, posted prices is not the optimal mechanism, which on the other hand, involves into bundling of both new and old versions of the good and selling them only together.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Dynamic Oligopoly Pricing: Evidence from the Airline Industry

Caspar Siegert (Munich) and Robert Ulbricht (Toulouse) offer Dynamic Oligopoly Pricing: Evidence from the Airline Industry.

ABSTRACT: We explore how pricing dynamics in the European airline industry vary with the competitive environment. Our results highlight substantial variations in pricing dynamics that are consistent with a theory of intertemporal price discrimination. First, the rate at which prices increase towards the scheduled travel date is decreasing in competition, supporting the idea that competition restrains the ability of airlines to price-discriminate. Second, the sensitivity to competition is substantially increasing in the heterogeneity of the customer base, reflecting further that restraints on price discrimination are only relevant if there is initial scope for price discrimination. These patterns are quantitatively important, explaining about 83 percent of the total within flight price dispersion, and explaining 17 percent of the observed cross-market variation of pricing dynamics.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, July 14, 2014

Too much or too little? Price-discrimination in a market for credence goods

Uwe Dulleck, QUT, Rudolf Kerschbamer, University of Innsbruck and Alexander Konovalov, University of Gothenburg ask Too much or too little? Price-discrimination in a market for credence goods.

ABSTRACT: In markets for credence goods sellers are better informed than their customers about the quality that yields the highest surplus from trade. This paper studies second-degree price-discrimination in such markets. It shows that discrimination regards the amount of advice offered to customers and that it leads to a different distortion depending on the main source of heterogeneity among consumers. If the heterogeneity is mainly in the expected cost of efficient service, the distortion involves overprovision of quality. By contrast, if consumers differ mainly in the surplus generated whenever the consumer's needs are met, the inefficiency involves underprovision of quality.

July 14, 2014 | Permalink | Comments (0) | TrackBack (0)

The Effectiveness of Competition Policy: An Econometric Assessment in Developed and Developing Countries

Danilo Sama (LUISS) explores The Effectiveness of Competition Policy: An Econometric Assessment in Developed and Developing Countries.

ABSTRACT: The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.

July 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Entry deterring effects of contractual relations in the dairy processing sector

Yvonne Zavelberg, Christine Wieck, Thomas Heckelei, all University of Bonn discuss Entry deterring effects of contractual relations in the dairy processing sector.

ABSTRACT: In 2010, the European (EU) High Level Expert Group on milk proposed the introduction of standard contracts between raw milk producers and processors to improve the bargaining position of producers and to stabilize the market by balancing dairy supply and demand. However, contracts may distort competition and deter market entry of rival dairies. We analyze competitive effects of contracts between dairy producers and processors by constructing a game theoretic model. We show that an incumbent dairy can deter a rival dairy’s market entry by offering an exclusive contract to a risk averse producer.

July 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition Law Enforcement in Malaysia: Some Recent Developments

Cassey LEE (University of Wollongong) describes Competition Law Enforcement in Malaysia: Some Recent Developments.

ABSTRACT: The enactment of the Competition Act 2010 represents a significant progress in the implementation of competition policy in Malaysia. The Malaysian Competition Commission has been fairly successful in its enforcement activities especially in price fixing cases involving trade associations. It has also investigated and issued proposed decisions in a number of high profile cases involving Malaysian Airlines, AirAsia, and Megasteel. Future challenges are likely to involve investigation of more complex anti-competitive cases, review of government regulations with impact on competition, possible introduction of merger controls and regional integration.

July 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, July 11, 2014

Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange

Danilo Sama, LUISS Guido Carli University of Rome discusses Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange.

ABSTRACT: In order to fight collusive behaviors, the best scenario for competition authorities would be the possibility to analyze detailed information on firms' costs and prices, being the price-cost margin a robust indicator of market power. However, information on firms' costs is rarely available. In this context, a fascinating technique to detect data manipulation and rigged prices is offered by an odd phenomenon called Benford's Law, otherwise known as First-Digit Law, which has been successfully employed to discover the "Libor Scandal'' much time before the opening of the cartel settlement procedure. Thus, the main objective of the present paper is to apply a such useful instrument to track the price of the aluminium traded on the London Metal Exchange, following the allegations according to which there would be an aluminium cartel behind. As a result, quick tests such as Benford's Law can only be helpful to inspect markets where price patterns show signs of collusion. Given the budget constraints to which antitrust watchdogs are commonly subject to, a such price screen could be set up, just exploiting the data available, as warning system to identify cases that require further investigations.

July 11, 2014 | Permalink | Comments (0) | TrackBack (0)

ABA Journal Blog Awards

The ABA Journal has begun the process of soliciting nominations for the 8th Annual Blawg 100 -- "the 100 best Web sites by lawyers, for lawyers, as chosen by the editors of the ABA Journal."

You may nominate your favorite blawg here.

July 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Russian Competition Law In Light Of The Principles Of Ex Post And Ex Ante

Konstantin Yu. Totyev (National Research University Higher School of Economics) describes Russian Competition Law In Light Of The Principles Of Ex Post And Ex Ante.

ABSTRACT: This article is devoted to the legitimation and application of the standards of ex post and ex ante by courts and the executive authorities in the sphere of competition regulation. The postulates of ex post and ex ante are considered as legal principles. The principle of ex post is intended solely for judicial and administrative application; it has a deontological framework; it assumes that the legality of the activity of economic entities is assessed only on the basis of positive legal criteria in terms of the subjective rights violated; it is limited to a particular case. The traditional approach to the principle of ex post limits the scope of its application on the subjects and excessively expands its objects. The postulate of ex ante has a utilitarian basis which assumes the assessment of the application of relevant rules in the future. One of the main aims of the article is to refute the common view of lawyers and economists that a legislator applies principle of ex ante not being bound by principle of ex post, while it is the other way around for the courts and the executive authorities. The principle of ex ante may be applied not only in the process of the creation of new rules but also at the application stage for existing rules on economic competition. This is justified because the arguments of the courts and the executive authorities about a refusal to take into account the consequences of a decision in a particular case are not convincing.

July 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Effects Of Hostility Tradition In Antitrust: Leniency Programs And Cooperation Agreements

Natalia Pavlova (National Research University Higher School of Economics) and Andrey Shastitko (National Research University Higher School of Economics) explore Effects Of Hostility Tradition In Antitrust: Leniency Programs And Cooperation Agreements.

ABSTRACT: The article focuses on the effects that type I errors can have on the incentives of firms to compete, collude or engage in efficiency promoting socially beneficial cooperation. Our results confirm that in the presence of type I errors the introduction of a leniency program can have ambiguous effects, including the destruction and prevention of welfare enhancing horizontal cooperation agreements. The obtained results help understand the negative impact the hostility tradition resulting in type I enforcement errors can have on social welfare when applied to the regulation of horizontal agreements.

July 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 10, 2014

Heterogeneous Price Dynamics, Synchronization, and Retail Chains: Evidence from Scanner Data

Andres Elberg (Universidad Diego Portales) discusses Heterogeneous Price Dynamics, Synchronization, and Retail Chains: Evidence from Scanner Data.

ABSTRACT: This paper uses a novel scanner data set to study price setting decisions of major retailers in an emerging market economy. I find evidence of heterogeneous pricing dynamics across retail chains. Heterogeneity is especially pronounced in the case of posted (as opposed to reference) prices. Furthermore, retail chains appear to set prices in a centralized fashion: most barcode-store level prices coincide with the intra-chain modal price. The relationship between reference and chain-wide prices reveals that deviations from reference prices cannot be solely attributed to shocks to local market conditions. In line with results on retail chain pricing, I find strong evidence of synchronization of price changes across stores within chains but weaker evidence of synchronization across retail chains. The evidence is also consistent with synchronization of price changes within retail stores.

July 10, 2014 | Permalink | Comments (0) | TrackBack (0)

The Essential Facilities Doctrine: The Lost Message of Terminal Railroad

Stephen M. Maurer and Suzanne Scotchmer University of California, Berkeley discuss The Essential Facilities Doctrine: The Lost Message of Terminal Railroad.

ABSTRACT: The growing importance of shared networks, shared platforms and shared standards leads to a renewed discussion of the essential facilities doctrine of antitrust. This is an area where European law and American law have diverged. In Trinko (2007), the U.S. Supreme Court came close to abolishing it. At the same time, it was reinvigorated by the European Commission, which asserted it successfully in E.C. v. Microsoft, and then, facing criticism, clarified the doctrine in a Guidance document. We harmonize the main cases around the doctrine’s original but often forgotten purpose namely, harvesting economic synergies through sharing. We argue that, absent such a doctrine, these synergies could be lost as firms either avoid sharing to avoid antitrust liability, or create sharing arrangements that undermine competition. We show how and why the original purpose of the doctrine has become entangled with other antitrust issues, i! n particular, leveraging. We systematize the sharing rules that have been imposed or allowed, with an emphasis on how to harvest synergies while mitigating any harm to competition.

July 10, 2014 | Permalink | Comments (0) | TrackBack (0)

GCR Live 2nd Annual New York 16 September 2014 at 09:00 to 18:00

GCR Live 2nd Annual New York

16 September 2014 at 09:00 to 18:00

New York, USA

.30: Welcome coffee and registration

9.00: Chairs’ opening remarks

Nick Levy, Cleary Gottlieb Steen & Hamilton Ronan Harty, Davis Polk & Wardwell

9.10: Keynote address and questions:

David Gelfand, Deputy Assistant Attorney General for Litigation, Antitrust Division, US Department of Justice

10.05: Session one: Antitrust enforcement in China – what next?

Moderator: Daniel Sokol, Levin College of Law, University of Florida

Introductory Speaker: Maureen K. Ohlhausen, Commissioner, Federal Trade Commission

Panel: Elizabeth Xiao-Ru Wang, Charles River Associates Mark Whitener, Senior Counsel, Competition Law & Policy, General Electric Company Alex Potter, Freshfields Bruckhaus Deringer

11.20: Coffee break

11.40: Session two: Merger control & minority interests – is the gap worth filling?

Moderator: Ilene Knable Gotts, Wachtell, Lipton, Rosen & Katz

Panel: Todd Miller, Baker & Miller Michael Moiseyev, Assistant Director, Bureau of Competition, Federal Trade Commission John Harkrider, Axinn, Veltrop & Harkrider Janusz A. Ordover, Compass Lexecon

12.55: Lunchtime speaker
Eric Stock, Chief of the Antitrust Bureau, New York State Attorney General

13.30: Networking lunch sponsored by Bennett Jones

14.30: Session three: Challenges in global antitrust enforcement

Moderator: Leon B. Greenfield, Wilmer Cutler Pickering Hale and Dorr

Panel: Melanie Aitken, Bennett Jones Kevin Arquit, Simpson Thacher & Bartlett Rachel Brandenburger, Hogan LovellsWilliam Kovacic, The George Washington University Law School
15.30:
Coffee break

15.45: Session four: Antitrust litigation in the EU – has its time now come?

Moderator: Fiona Schaeffer, Milbank, Tweed, Hadley & McCloy

Panel: Anthony Maton, Hausfeld & Co Nicole Kar, Linklaters Robert O'Donoghue, Brick Court Chambers Jordan Ellison, Slaughter and May

17.15: Chairs’ closing remarks

17.30: All delegates are invited to attend a cocktail reception kindly hosted by Davis Polk & Wardwell.

July 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition and the Hold‐Up Problem: a Setting with Non‐exclusive Contracts

Guillem Roig (Toulouse) analyzes Competition and the Hold‐Up Problem: a Setting with Non‐exclusive Contracts.

ABSTRACT: This work studies how the introduction of competition to the side of the market offering trading contracts affects the equilibrium investment profile in a bilateral investment game. By using a common agency framework, where contracts are not exclusive, we find that the equilibrium investment profile depends on the competitiveness of the equilibrium outcome. Full efficiency can only be implemented when the trading outcome is the most competitive. Moreover, lowering the outcome competitiveness is not always Pareto dominant for the parties offering the contracts, and larger social welfare can be obtained with low competitive equilibria.

July 10, 2014 | Permalink | Comments (0) | TrackBack (0)