Monday, September 14, 2015
Estimating Equilibrium in Health Insurance Exchanges: Analysis of the Californian Market under the ACA
ABSTRACT: This paper develops and estimates a model of a regulated health insurance exchange, in which insurers ability to adjust prices across buyers with different observed risk or preferences is restricted. I show conditions under which the joint distribution of risk and preferences is identified, even when the econometrician does not observe any information on individual risk. These primitives can then be used to simulate equilibrium under alternative regulations. I estimate the model with data from the first year of the Californian exchange under the Affordable Care Act, where age-rating restrictions and a subsidy program determine the way in which insurers decisions translate to expected profits. For this market, I investigate alternative designs of the subsidy program. Compared to the subsidy formula mandated by the healthcare reform, the adoption of a voucher program â€“ providing buyers with a lump-sum equal to 70-80% of their expected! expenditure â€“ would transfer welfare away from insurers, favoring consumers and/or taxpayers. Simulations of equilibrium under this alternative policy result in total coverage between 100-115% of the levels achieved by the current regulations, while also reducing government expenditure, average premiums, and markups, by 0-20%, 12-15%, and 22-27%, respectively.
Saturday, September 12, 2015
Vivek Ghosal, Georgia Institute of Technology; Center for Economic Studies and Ifo Institute for Economic Research (CESifo) and D. Daniel Sokol, University of Florida - Levin College of Law discuss Policy Innovations, Political Preferences, and Cartel Prosecutions.
ABSTRACT: Though cartel prosecution has received significant attention, the policy determinants and the political preferences that guide such prosecutions remain understudied. We empirically examine the intertemporal shifts in U.S. cartel prosecutions during the period 1969-2013. This period has seen substantive policy innovations with increasing penalties related to fines and jail terms. There appear to be four distinct cartel policy regimes: pre-1978, 1978-1992, 1993-2003, and 2004-2013. Our empirical estimates show significant variation in the number of cartels prosecuted and the penalties imposed across the policy regimes. The more recent regimes are characterized by far fewer cartels prosecuted, but with substantially higher penalties levied on firms and individuals. While effective deterrence is one explanation for these patterns, we are more inclined to conclude that US cartel enforcement has seen an underlying shift away from focusing on smaller cartels to larger and multinational firms. In terms of political effects, our results reveal no clear inter-political party effect on cartel prosecutions, but there appear to be interesting intra-political party effects. We find that particular Presidencies matter for cartel prosecutions, and variation across Presidential administrations led to marked shifts in the total number of cartels prosecuted. Overall, the shifts in the number of cartels prosecuted and penalties levied portray changing policy priorities and a search for the optimal enforcement design to curtail one of the clearest sources of welfare loss, collusion.
Friday, September 11, 2015
Dertwinkel-Kalt, Markus ; Wey, Christian analyze Merger remedies in oligopoly under a consumer welfare standard.
ABSTRACT: We analyze the welfare effects of structural remedies on merger activity in a Cournot oligopoly if the antitrust agency applies a consumer surplus standard. We derive conditions such that otherwise price-increasing mergers become externality-free by the use of remedial divestitures. In this case, the consumer surplus standard ensures that mergers are only implemented if they increase social welfare. If the merging parties can extract the entire surplus from the asset sale, then the socially optimal buyer will be selected under a consumer standard.
University of Florida Sept. 11, 2015 – Louis Kaplow presents the Bayard Wickliffe Heath Memorial Lecture
The University of Florida Levin College of Law presents the 2015 Bayard Wickliffe Heath Memorial Lecture Series.
Louis Kaplow (Harvard) is presenting. Commenting are Kai Uwe Kuhn (University of Michigan) and Abe Wickelgren (University of Texas).
Harvard Law Professor Louis Kaplow will deliver the lecture, “Market Definition and Market Power.” Kaplow is Finn M.W. Caspersen and Household International Professor of Law and Economics at Harvard Law School, Associate Director of the John M. Olin Center for Law, Economics, and Business, a Research Associate at the National Bureau of Economic Research, and a Fellow of the American Academy of Arts and Sciences. He has a Ph.D. in economics and a J.D. from Harvard University. He has published widely in the fields of taxation and public economics, antitrust, law and economics, and welfare economics and moral philosophy. He serves on editorial boards of numerous journals and has been an economic and legal consultant to government entities and private parties.
The Heath Memorial Lecture Series is made possible by a gift from Inez Heath, Ph.D., widow of Bayard “Wick” Heath. Before his death in 2008, Heath was the senior competition consultant with Info Tech, a Gainesville firm specializing in statistical and econometric consulting, expert witness testimony and antitrust law. Previous lecturers include Herbert Hovenkamp, William Kovacic, Joseph Harrington and Dennis Carlton.
David Kopanyi (Department of Economics, University of Nottingham) and Anita Kopanyi-Peuker (University of Amsterdam) provide results in Endogenous information disclosure in experimental oligopolies.
ABSTRACT: With this research we examine whether observing firm-specific production levels leads to a less competitive market outcome. We consider an endogenous information setting where firms can freely decide whether they want to share information about their past production levels. By voluntarily sharing information, firms can show their willingness to cooperate. We conduct a laboratory experiment where firms decide only about their production levels first, and the information they receive is exogenous (either no information, or aggregate / disaggregated information about others' production, in varying order). Later, firms can also decide whether to share their past production levels with others. We vary the kind of information firms receive: they receive the shared information either in aggregate or in disaggregated form. Our results show no difference in average total outputs across data aggregation and information settings. However, we observe more collusion wh! en individual information was shared voluntarily. Our results show that subjects use voluntary sharing to show their intentions to cooperate. If they share information, they produce significantly less than if they do not share information.
Sebastien Mitraille (Toulouse Business School, University of Toulouse) and Henry Thille (Department of Economics and Finance, University of Guelph) offer Speculative Constraints on Oligopoly.
ABSTRACT: We examine an infinite horizon game in which producers output can be purchased by speculators for resale in a future period. The existence of speculators serves to constrain the feasible set of prices that can result from producers output game in each period. Absent speculation, producers play a repeated Cournot game with random demand. With speculative inventories possible, the game becomes a dynamic one in which speculative stocks are a state variable which firms can control via their influence on price. We employ collocation methods to find the unknown expected price and value functions required for computation of equilibrium quantities. We demonstrate that strategic considerations result in an incentive to sell to speculators that is nonmonotonic in the number of producers: speculation has the largest effect on equilibrium prices and welfare for market structures intermediate between monopoly and perfect competition. Using a computed example, we demonstrate that the effect of speculative storage on the average price level can be substantial, even though the effects on social welfare can be ambiguous.
Thursday, September 10, 2015
Jeon, Doh-Shin ; Lefouili, Yassine write on Cross-Licensing and Competition.
ABSTRACT: We study bilateral cross-licensing agreements among N (> 2) competing firms. We find that the fully cooperative royalty, i.e., the one that allows them to achieve the monopoly profit, can be sustained as the outcome of bilaterally efficient agreements, regardless of whether the agreements are public or private and whether firms compete in quantities or prices. We extend this monopolization result to a general class of two-stage games in which firms bilaterally agree in the first stage to make each other payments that depend on their second-stage non-cooperative actions. Policy implications regarding the antitrust treatment of cross-licensing agreements are derived.
C. Benassi ; M. Castellani ; M. Mussoni theorize about Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly.
ABSTRACT: In the framework of a vertically differentiated mixed duopoly, with uncovered market and costless quality choice, we study the existence of a price equilibrium when a welfare-maximizing public firm producing low quality goods competes against a profit-maximizing private firm producing high quality goods. We show that a price equilibrium exists if the quality spectrum is wide enough vis a vis a measure of the convexity of the distribution of the consumers' willingness to pay, and that such equilibrium is unique if this sufficient condition is tightened. Log-concavity of the income distribution is inconsistent with the existence of equilibrium.
Robert A. Ritz explores The Simple Economics of Asymmetric Cost Pass-Through.
ABSTRACT: In response to cost changes, prices often rise more strongly or quickly than they fall. This phenomenon has attracted attention from economists, policymakers, and the general public for decades. Many assert that it cannot be explained by standard economic theory, and is evidence for “anti-competitive” behaviour by firms. This paper argues against this conventional wisdom; it shows that simple price theory can, in principle, account for such asymmetric pass-through - even with perfect competition. From a policy perspective, knowledge of cost pass-through patterns in a market does not allow for strong inferences on the intensity of competition.
The Relationship between Banking Competition and Stability in Developing Countries: The Case of Libya
ABSTRACT: In our paper, we examined the relationship between non-performing loans, as a measure of stability, and concentration, as a measure of competition, in the Libyan banking sector. We used aggregate quarterly data for the 15 commercial banks in the country during the period 2002-2013. A broad set of tests were conducted to measure the relationship between the two variables, and alternative robustness tests were conducted to assure our core finding that less competition in the banking sector leads to a more resilient banking sector. Thus, our results offer empirical support against “competition–stability” theory and conform to the “competition–fragility” literature. We conclude by recommending the need to inspect in more detail (on a bank by bank level) the relationship between competition and fragility in developing countries in general and in Libya in particular.
Wednesday, September 9, 2015
ABSTRACT: We explore whether non-competitive pricing prevails in Germany's retail gasoline market by examining the influence of the crude oil price on the retail gasoline price, focusing specifically on how this influence varies according to the brand and to the degree of competition in the vicinity of the station. Our analysis identifies several factors other than cost - including the absence of nearby competitors and regional market concentration - that play a significant role in mediating the influence of the oil price on the retail gas price, suggesting price setting power among stations.
Nadja Kairies-Schwarz has written on Altruism heterogeneity and quality competition among healthcare providers.
ABSTRACT: New empirical evidence shows substantial heterogeneity in the altruism of healthcare providers. Spurred by this evidence, we build a spatial quality competition model with altruism heterogeneity. We find that more altruistic healthcare providers supply relatively higher quality levels and position themselves closer to the center. Whether the social planner prefers more or less horizontal differentiation is in general ambiguous and depends on the level of altruism. The more altruistic healthcare providers are, the more likely it is that the social planner prefers greater horizontal differentiation to offset costly quality competition.
ABSTRACT: The correct definition of the product market and of the geographic market is a prerequisite for assessing market structures in antitrust cases. For hospital markets, both dimensions are controversially discussed in the literature. Using data for the German hospital market we aim at elaborating the need for differentiating the product market and at investigating the effects of different thresholds for the delineation of the geographic market based on patient flows. Thereby we contribute to the scarce empirical evidence on the structure of the German hospital market. We find that the German hospital sector is highly concentrated, confirming the results of a singular prior study. Furthermore, using a very general product market definition such as 'acute in-patient care' averages out severe discrepancies that become visible when concentration is considered on the level of individual diagnoses. In contrast, varying thresholds for the definition of the geographic market has only impact on the level of concentration, while the correlation remains high. Our results underline the need for more empirical research concerning the definition of the product market for hospital services.
Healthcare in the 21st Century: The Role of Competition Friday September 18, 2015 from 8:45 AM to 5:30 PM PDT
Healthcare is the single largest sector of the economy, it is undergoing extensive and controversial reform, and the central goals of reform – universal coverage and cost control – have not yet been achieved. Since the Affordable Care Act relies heavily on private markets to provide health services and health insurance, competition will play a crucial role in reform. Yet, competition policy issues are especially challenging in healthcare, where markets are distorted by the fee-for-service payment system, insurance coverage, and market power. Competition can help correct these distortions, enhancing access and affordability, but it can also threaten the supply of doctors, new drugs, and higher levels of care. The challenge is to develop policies that achieve the right balance of these goals. The symposium will address many of the key current competition issues in healthcare, including Accountable Care Organizations, acquisitions of physician groups by hospitals, reverse-payment settlements, federal negotiation of drug prices, mergers of insurance companies, off-label uses of prescription drugs, the regulatory environment for the healthcare workforce, and market provision of assisted reproduction technologies.
(agenda is subject to revision)
9:00 am Welcome
- Annette Clark, Dean and Professor of Law, Seattle University School of Law
- John B. Kirkwood, Professor of Law, Seattle University School of Law, and former Assistant Director of Planning and Assistant Director of Evaluation, Bureau of Competition, Federal Trade Commission
9:15 am Accountable Care Organizations and Vertical Acquisitions of Providers
Thomas Greaney, Chester A. Myers Professor of Law and Co-Director, Center for Health Law Studies, Saint Louis University School of Law and
Douglas Ross, Partner, Davis Wright Tremaine, and Part-Time Lecturer, University of Washington School of Law
Roger Blair, Walter J. Matherly Professor of Economics, University of Florida
Christine Piette Durrance, Assistant Professor of Public Policy, University of North Carolina at Chapel Hill and
D. Daniel Sokol, Professor of Law, Levin College of Law, University of Florida
Comments: Douglas A. Conrad, Professor of Health Services, University of Washington
10:45 am Break
11:00 am Prescription Drug Issues
Michael Carrier, Distinguished Professor of Law, Rutgers School of Law, Camden
[Plans to address the role of “large and unjustified” payments in judicial analysis of reverse-payment settlements]
William S. Comanor, Professor of Health Policy and Management, Fielding School of Public Health, University of California, Los Angeles; Professor of Economics, University of California, Santa Barbara; and former Director, Bureau of Economics, Federal Trade Commission, and
Jack Needleman, Professor of Health Policy and Management, Fielding School of Public Health, University of California, Los Angeles
“The Law, Economics, and Medicine of Off-Label Prescribing of Pharmaceuticals”
Comments: Hugh Bangasser, Partner, K&L Gates, and Part-Time Lecturer, University of Washington School of Law
12:30 pm Break
12:45 pm Lunch and Keynote Address
William E. Kovacic, Global Competition Professor of Law and Policy, and Director, Competition Law Center, George Washington School of Law, and former Chairman, Federal Trade Commission, writing with
David Hyman, H. Ross & Helen Workman Chair in Law, and Director, Epstein Program in Health Law and Policy, University of Illinois College of Law
2:00 pm Buyer Power Issues; Distinctive Nature of Healthcare Antitrust
John B. Kirkwood, Professor of Law, Seattle University School of Law, and former Assistant Director of Planning and Assistant Director of Evaluation, Bureau of Competition, Federal Trade Commission
“Buyer Power and Healthcare Prices”
Spencer W. Waller, Professor of Law and Director, Institute for Consumer Antitrust Studies, Loyola University Chicago School of Law
“How Much of Health Care Antitrust is Really Antitrust?”
Comments: Sallie T. Sanford, Associate Professor of Law and Adjunct Associate Professor of Health Services, University of Washington
3:30 pm Break
3:45 pm Workforce Regulation; Market for Assisted Reproduction
Andrew Gavil, Professor of Law, Howard University School of Law, and former Director, Office of Policy Planning, Federal Trade Commission, and
Tara Isa Koslov, Deputy Director, Office of Policy Planning, Federal Trade Commission
“A Flexible Healthcare Workforce Requires a Flexible Regulatory Environment”
June Carbone, Robina Chair in Law, Science and Technology, University of Minnesota Law School, and
Jody Lyneé Madeira, Professor of Law, Indiana University School of Law, Bloomington
[Will explore the role of the patient as consumer in the market for assisted reproductive technologies on consumers]
Comments: Jeffrey M. Sconyers, Senior Lecturer, Graduate Program in Health Services Administration, University of Washington
5:15 pm Break
7:00 pm Reception and Dinner
Tuesday, September 8, 2015
Biennial ABA Antitrust and Intellectual Property Conference - Thursday, October 8, 2015 Stanford Law School
This is a conference worth attending.
The biennial ABA Section of Antitrust Law Antitrust and Intellectual Property Conference, co-sponsored with the Section of IP Law and Stanford Law School, is a flagship Section conference. This one-day conference in Silicon Valley will focus multiple panels of industry, government and academic luminaries on issues of most importance to those who advise companies about their intellectual property. Plan to attend this conference for a deep exploration of the key issues and risks related to patent aggregation, standard essential patents, as well as other issues inherent in the enforcement of intellectual property rights.
Songs I Remember From the 80s and Their Videos - Watching Them Again 30 Years Later With My Daughters
Yesterday during Labor Day, I did some work. The girls then showed me the newest Taylor Swift video - Wildest Dreams (with an African Safari theme).
My ten year old and eight year old asked what videos were like when I was their age. I showed them some. The girls were unimpressed by the quality of the videos except the last one we saw (see below).
The Eye of the Tiger - Survivor
I remember this as the end song from Rocky III.
I explained the some videos had stories within them, like The Hooters - And We Dancd
I also remember videos that were essentially concert footage.
Peter Gabriel - In Your Eyes
Some videos were really innovative.
Aha - Take On Me
Does Reference Pricing Drive Out Generic Competition in Pharmaceutical Markets? Evidence from a Policy Reform
Kurt R. Brekke (Department of Economics, Norwegian School of Economics) ; Chiara Canta (Department of Economics, Norwegian School of Economics) ; and Odd Rune Straume (Universidade do Minho - NIPE) ask Does Reference Pricing Drive Out Generic Competition in Pharmaceutical Markets? Evidence from a Policy Reform.
ABSTRACT: In this paper we study the impact of reference pricing (RP) on entry of generic firms in the pharmaceutical market. For given prices, RP increases generic firms' expected profit, but since RP also stimulates price competition, the impact on generic entry is theoretically ambiguous. In order to empirically test the effects of RP, we exploit a policy reform in Norway in 2005 that exposed a subset of drugs to RP. Having detailed product-level data for a wide set of substances from 2003 to 2013, we find that RP increased the number of generic drugs. We also find that RP increased market shares of generic drugs, reduced the prices of both branded and generic drugs, and led to a (weakly significant) decrease in total drug expenditures. The reduction in total expenditures was relatively smaller than the reduction in average prices, reflecting the fact that lower prices stimulated total demand.
Monday, September 7, 2015
Michael D. Grubb (Boston College) looks at Failing to Choose the Best Price: Theory, Evidence, and Policy.
ABSTRACT: Both the "law of one price" and Bertrand's (1883) prediction of marginal cost pricing for homogeneous goods rest on the assumption that consumers will choose the best price. In practice, consumers often fail to choose the best price because they search too little, become confused comparing prices, and then show excessive inertia through too little switching away from past choices or default options. This is particularly true when price is a vector rather than a scalar, and consumers have limited experience in the relevant market. All three mistakes may contribute to positive markups that fail to diminish as the number of competing sellers increases. Firms may have an incentive to exacerbate these problems by obfuscating prices, thereby using complexity to make price comparisons difficult and soften competition. Possible regulatory interventions include simplifying the choice environment, for instance by restricting price to be a scalar, advising consumers ! of their expected costs under each option, or choosing on behalf of consumers.
ABSTRACT: This paper succinctly overviews three primary branches of the industrial organization literature with behavioral consumers. The literature is organized according to whether consumers: (1) have non-standard preferences, (2) are overconfident or otherwise biased such that they systematically misweight different dimensions of price and other product attributes, or (3) fail to choose the best price due to suboptimal search, confusion comparing prices, or excessive inertia. The importance of consumer heterogeneity and equilibrium effects are also highlighted along with recent empirical work.
Program for Smoothening Punishment for Participating in a Cartel: The Problematic Field, and the Effects of Structural Alternatives
Shastitko, Andrey (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) and Pavlova, Natalia (National Research University Higher School of Economics - Institute for Industrial and Market Studies) suggest Program for Smoothening Punishment for Participating in a Cartel: The Problematic Field, and the Effects of Structural Alternatives.
ABSTRACT: The work is an attempt to analyze leniency programs for cartel participants in terms of discrete structural alternatives of their design. A set of basic theoretical bifurcations in the structure of such programs is established. Consequently, for each bifurcation the main structural alternatives are defined. Leniency programs in the US and the EU are used to illustrate some of the specifics of programs functioning in practice. The analysis allows us to outline the problem field of developing leniency programs and to offer a number of solutions to emerging problems.