Sunday, May 26, 2019

Book Review: Michal Gal on Eleanor M. Fox and Mor Bakhoum, Making Markets Work for Africa (Oxford 2019)

Book Review of Eleanor M. Fox and Mor Bakhoum, Making Markets Work for Africa (Oxford, 2019), by Prof. Michal S. Gal

Eleanor Fox and Mor Bakhoum’s new book, Making Markets Work for Africa (Oxford University Press, 2019), is a tour de force study of the interaction between markets, development, and competition law in sub-Saharan Africa. It is a must read for anyone interested in competition law in developing jurisdictions.

Fox and Bakhoum, both world-renowned experts on competition law in developing jurisdictions, combine their unique talents, knowledge and expertise to offer us an in-depth analysis of the challenges faced by sub-Saharan jurisdictions in making their markets work. Their book not only analyzes in a systematic manner the unique features of Sub-Saharan countries, but also offers thoughtful and thought-provoking insights and suggestions, both at the local as well as at the global level.

The book is comprised of two main parts. The first focuses on three groups of states in sub-Saharan Africa, based on their location and shared history. The socioeconomic characteristics of the different jurisdictions are carefully analyzed, as well as their history of market control mechanisms, and the content and application of their competition laws. Regional competition law agreements are then analyzed, focusing on their huge potential benefits and their internal limitations. One of the many strengths of this part is its ability to use country-specific examples to reach boarder observations.

The second part then offers a roadmap towards more workable markets. To do so, Professors Fox and Bakhoum define four groups of countries, based on their level of development, from least developing jurisdictions to developed jurisdictions. The analysis enables them to highlight the different challenges faced by each group, as well as the difficulties in applying a one-size-fits-all competition law to all jurisdictions. The authors then offer numerous insightful and important suggestions on how to design competition laws in a way which would best serve developing and least developing jurisdictions in Africa. Some suggestions, such as giving priority to agriculture and infrastructure, or devising tools to limit the control of government cronies which do not serve consumers, are widely accepted. Other thoughtful suggestions, such as reconsidering the application of the “as-efficient” test as the benchmark for exclusionary foreclosures, or defining markets in a way which takes into account the level of development of the market, might require the reader to challenge his assumptions about how competition law should be applied in developing jurisdictions. The analysis is both important and novel.

Despite the fact that the book focuses on sub-Saharan Africa, it has much boarder implications, and many of its insights and suggestions are relevant to all, or at least most, developing jurisdictions around the world. Accordingly, anyone interested in competition law in developing jurisdictions will surely benefit from this book. It will appeal to newcomers in the field, as well as to those long involved in the field, who seek a fresh and highly thoughtful analysis of the relevant challenges.

Prof. Michal S. Gal, University of Haifa Faculty of Law, and president of ASCOLA.

May 26, 2019 | Permalink | Comments (0)

Saturday, May 25, 2019

By:	Uday Bhanu Sinha (Department of Economics, Delhi School of Economics)
Abstract:	We develop a supergame model of collusion between price-setting oligopolists when the trade between countries involves per-unit trade cost and FDI requires a fixed cost of setting up a subsidiary in a foreign country. We demonstrate that cross hauling of FDI may facilitate collusion based on territorial allocation of markets. Whenever FDI is not helpful for sustaining collusion, the collusive arrangement involves no FDI at all. With asymmetric number of home firms or with different sizes of the markets, FDI may facilitate international collusion at lower levels of trade costs and thus our analysis also throws some light on the empirical puzzle regarding the trade liberalisation and FDI flows observed since the 1990s.
Keywords:	Foreign direct investment, collusion, multimarket contact, cross hauling of FDI, price competition, homogenous good.


URL:	http://d.repec.org/n?u=RePEc:cde:cdewps:295&r=com

By:	Gayle, Philip; Xie, Xin
Abstract:	Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). Whether consumers, on net, benefit from a grant of ATI to partner airlines has caused much public debate. This paper investigates the impact of granting ATI to oneworld alliance members on their price, markup, and various measures of cost. The evidence suggests that implementation of the oneworld alliance without ATI did not have a statistically significant impact on the markup of products offered by the members, and there is no evidence that the subsequent grant of ATI to various members resulted in higher markups on their products. We find evidence suggesting that the grant of ATI facilitated a decrease in partner carriers’ marginal and fixed costs. Furthermore, member carriers’ price did not increase (decreased) in markets where their services do (do not) overlap, implying that consumers, on net, benefit from the grant of ATI in terms of price changes.



URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:89914&r=com

By:	Joshua Gans; Andrew Leigh; Martin Schmalz; Adam Triggs
Abstract:	Economic theory suggests that monopoly prices hurt consumers but benefit shareholders. But in a world where individuals or households can be both consumers and shareholders, the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households. The paper calculates this distribution for the United States, using data from the Survey of Consumer Finances and the Consumer Expenditure Survey, spanning nearly three decades from 1989 to 2016. In 2016, the top 20 percent consumed approximately as much as the bottom 60 percent, but had 13 times as much corporate equity. Because ownership is more skewed than consumption, increased mark-ups increase inequality. Moreover, over time, corporate equity has become even more skewed relative to consumption.



URL:	http://d.repec.org/n?u=RePEc:een:camaaa:2018-62&r=com

By:	Bergantino, Angela Stefania; Capozza, Claudia; Intini, Mario
Abstract:	This paper explores the nature of price variation in the retail gasoline sector with a novel approach. An empirical model is proposed that jointly analyses: i) the spatial interaction between stations in price setting; ii) the direct and the indirect effect of local competition on prices; iii) the role of territorial factors, generally neglected in the studies on gasoline prices. For all these purposes, variables at sub-municipal level are constructed. The results of the empirical model, tested on the city of Rome, confirm the spatial price interaction across stations. Moreover, evidence of direct and indirect effects of local competition on prices is found: the competitive forces acting in the gasoline sector are not bounded within a local market but they spill over across local markets. Micro-territorial variables turn out to have a sizeable influence on prices, particularly the real estate value. When these variables are added to the model, the strength of spatial interaction weakens. This suggests that including micro-territorial variables in the empirical specification strongly contributes to explain the variation of gasoline prices and to accurately detect the spatial dependence.

URL:	http://d.repec.org/n?u=RePEc:sit:wpaper:18_5&r=all

By:	Didier Laussel (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Joana Resende (Economics Department, University of Porto)
Abstract:	We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of up-stream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers' point of view. In this equilibrium there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances.



URL:	http://d.repec.org/n?u=RePEc:aim:wpaimx:1842&r=all

By:	Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Canta, Chiara (Toulouse Business School); Straume, Odd Rune (University of Bergen, Department of Economics and University of Minho, Department of Economics/NIPE); Siciliani, Luigi(University of York)
Abstract:	We study the impact of exposing hospitals in a National Health Service (NHS) to non-price competition by exploiting a patient choice reform in Norway in 2001. The reform facilitates a difference-in-difference research design due to geographical variation in the scope for competition. Using rich administrative data covering the universe of NHS hospital admissions from 1998 to 2005, we find that hospitals in more competitive areas have a sharper reduction in AMI mortality, readmissions, and length of stay than hospitals in less competitive areas. These results indicate that competition improves patient health outcomes and hospital cost efficiency, even in the Norwegian NHS with large distances, low fixed treatment prices, and mainly public hospitals.



URL:	http://d.repec.org/n?u=RePEc:hhs:nhheco:2018_028&r=all

By:	Giovanni Immordino (Università di Napoli Federico II and CSEF); Salvatore Piccolo (Università di Bergamo and CSEF); Paolo Roberti (Università di Bergamo)
Abstract:	We analyze the relationship between competition and self-reporting incentives within a criminal network formed by a supplier of an illegal good and two dealers distributing the good to final consumers. The Legislator designs a leniency program to deter crime. We show that the comparison between the optimal amnesty with competition and monopoly in the dealership market depends on the strength of the externalities between dealers at the reporting stage. While in monopoly a leniency program is al- ways feasible, the opposite may happen with competition. This impossibility result is more relevant when the demand for the illegal product is large, when the market is neither too competitive nor too concentrated and when dealers know too much about each other. Moreover, in contrast to monopoly, the policy does not necessarily increase welfare in a competitive environment.


URL:	http://d.repec.org/n?u=RePEc:sef:csefwp:519&r=all

By:	Hashmat Khan (Department of Economics, Carleton University); Matthew Strathearn (Department of Economics, Carleton University)
Abstract:	We develop and test a novel prediction of the theory of collusion over the business cycle. Building on Haltiwanger and Harrington (1991), we present a model of collusive behaviour in the presence of persistent demand and an Antitrust Authority (AA) in a Cournot framework. The level of collusion is higher during a boom relative to a recession as collusion occurs more frequently when demand is increasing (entering into a collusive arrangement is more profitable and deviating from an existing cartel is less profitable). The model predicts that the number of discovered cartels and hence an- titrust filings should be procyclical because the level of collusion is procyclical. Using a unique data set of United States Antitrust filings, we present robust evidence con- sistent with the model's prediction. We find that antitrust filings are procyclical even after controlling for AA's monitoring intensity. The evidence suggests that procyclical competition policies may be a cost minimizing solution to asymmetries in collusive behaviour over the business cycle.



URL:	http://d.repec.org/n?u=RePEc:car:carecp:18-13&r=all

By:	Güth, Werner; Stadler, Manfred; Zaby, Alexandra
Abstract:	In a capacity-then-price-setting game we experimentally identify capacity precommitment, the possibility to communicate before price choices, and prior competition experience as crucial factors for collusive pricing. The theoretical analysis determines the capacity thresholds above which firms have an incentive to coordinate on higher prices. The experimental data reveals that such intra-play communication after capacity but before price choices has a collusive effect only for capacity levels exceeding these thresholds. Subjects with high capacities generally choose higher prices when they have the possibility to communicate. Asymmetry in capacity choices decreases the truthfulness of price messages as well as the probability to coordinate on the same price.



URL:	http://d.repec.org/n?u=RePEc:zbw:tuewef:114&r=all

By:	Duarte Brito (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia \| Center for Advanced Studies in Management and Economics); Ricardo Ribeiro (Universidade Católica Portuguesa, Católica Porto Business School); Helder Vasconcelos (Universidade do Porto, Faculdade de Economia and Center for Economics and Finance)
Abstract:	In this paper we investigate the anti-competitive e¤ects of partial horizontal ownership in a setting where: (i) two cost-asymmetric ?rms compete à la Cournot; (ii) managers deal with eventual con?icting interests of the di¤erent shareholders by maximizing a weighted sum of rms?operating pro?ts; and (iii) weights result from the corporate control structure of the ?rm they run. Within this theoretical structure, we ?nd that if the manager of the more e¢ cient rm weights the operating pro?t of the (ine¢ cient) rival more than its own pro?t, then partial ownership can lessen competition more than a monopoly.



URL:	http://d.repec.org/n?u=RePEc:cap:wpaper:022018&r=all

By:	Donna, Javier D.; Pereira, Pedro; Pires, Tiago; Trindade, Andre
Abstract:	We empirically investigate the welfare of intermediaries in oligopolistic markets, where intermediaries offer additional services. We exploit the unique circumstance that, in our empirical setting, consumers can purchase from manufacturers or intermediaries. We specify an equilibrium model, and estimate it using product-level data. The demand includes consumers with costly search and channel-specific preferences. The supply includes two distribution channels. One features bargaining about wholesale prices between manufacturers and intermediaries, and price competition among intermediaries. The other is vertically integrated. The model is used to simulate counterfactuals, where intermediaries do not offer additional services. We find that intermediaries increase welfare.
Keywords:	Intermediaries, vertical markets, search frictions, bargaining, outdoor advertising


URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:90465&r=all

By:	Hollenbeck, Brett
Abstract:	The relationship between mergers and the long run rate of innovation is an open question in antitrust economics. I develop a framework to examine this in a dynamic oligopoly model with endogenous investment, entry, exit and horizontal mergers. Firms produce vertically differentiated goods and may merge with rival firms to gain market power and potentially increase the quality of their product. I extend previous work on dynamic mergers by allowing for products differentiated on quality with competition in prices and an endogenous long run rate of innovation. In equilibrium, horizontal mergers are almost entirely harmful to consumers in the short run, but the prospect of a buyout creates a powerful incentive for firms to preemptively enter the industry and invest to make themselves an attractive merger partner. The result is significantly higher rate of innovation with mergers than without and significantly higher long-run consumer welfare as well. Further results explore the circumstances under which this result is likely to hold. In order for the long run increase in innovation to outweigh the short run harm to consumers caused by mergers, entry costs must be low, entrants and incumbents must both have the ability to innovate rapidly, and the degree of horizontal product differentiation must be low. Alternatively, when mergers can generate innovation directly by allowing firms to combine their products they typically benefit consumers in both the short run and long run.



URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:90764&r=all

By:	Smirnov, Vladimir; Wait, Andrew; Xu, Rong
Abstract:	We examine entry in a market-entry timing model. Early entry allows a firm to enjoy a higher instantaneous post-entry pro t, while later entry has the benefi t of lower entry costs. In our model, firms can be asymmetric in terms of costs. Specifically, a more efficient rm enters with lower present value of costs. First, we show that entry order is always efficient in the duopoly game while in the triopoly model an efficient entry order could be violated. Moreover, one of the most notable results is that in the triopoly model we generate the necessary condition for an efficient order of entry. In addition, we explore how the rents earned by duopolists relative to a monopolist (the structure of pro ts in the market) impact the order of entry. These results would be useful for future empirical studies of market entry. Furthermore, our paper investigates the welfare implications of the entry in equilibrium by exploring the dynamics of the initial entry time in duopoly and triopoly markets. Previous studies found that the leader's time of entry is typically inefficiently too late. Our results show that unlike in the symmetric case, in the presence of asymmetric fi rms, fi rst entry is not necessarily inefficiently delayed, especially in markets with higher duopoly effects (which capture duopoly rents relative to those for a monopolist) and with fi rms that are more differentiated. This result implies that encouraging an extra fi rm to enter in an oligopolistic market could shorten the period consumers have to wait for new products, and potentially increase social welfare.


URL:	http://d.repec.org/n?u=RePEc:syd:wpaper:2018-11&r=all

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