Wednesday, April 23, 2008

Antitrust Law Faculty Moves 2008

Posted by D. Daniel Sokol

April 24 Version

Below are the list of US permanent antitrust law faculty moves for 2008.

Name                           New School

Shubha Ghosh               University of Wisconsin
Max Huffman                University of Indiana - Indianapolis
Daniel Sokol                  University of Florida
Paul Stancil                   University of Illinois 

Visiting Professors (and the visiting institutions) for next year are as follows:
Dan Crane, Cardozo (Catholic University of Lisbon, University of Chicago)
Josh Wright, George Mason (University of Texas)

April 23, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 22, 2008

The Microsoft Case: The IT Industry and the Future of EC Competition Law

Posted by D. Daniel Sokol

The Microsoft Case: The IT Industry and the Future of EC Competition Law

University of Birmingham

Conference Programme            

15.30 – 16:00 Registration and coffee            

16:00-16:10 Welcome and introduction
Chair: Dr Luca Rubini (IEL, Birmingham Law School)
          Professor Martin Trybus (Director, IEL, Birmingham Law School)            

16:10-18:00 Presentations            

18:00-18:30 Questions and discussion            

18:30 – 19:30 Refreshments

April 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Rambus Overturned by DC Circuit

Posted by D. Daniel Sokol

According to the NY Times, the DC Circuit has overturned Rambus.  I am surprised, as I thought that the FTC had a strong case.  The decision itself can be found here.

HT: Paul Jones

April 22, 2008 | Permalink | Comments (1) | TrackBack (0)

Harris to Jones Day

Posted by D. Daniel Sokol

Normally we do not report on practitioner moves but this one is a biggie.  Steve Harris, the leading Asian antitrust practitioner in the United States, has made a lateral move to Jones Day where he joins an already very strong antitrust team.  The Jones Day press release is here.

April 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Compensation Function and Deterrence Effects of Private Actions for Damages: The Case of Antitrust Damage Suits

Posted by D. Daniel Sokol

Francesco Denozza and Luca Toffoletti of the University of Milan Faculty of Jurisprudence discuss Compensation Function and Deterrence Effects of Private Actions for Damages: The Case of Antitrust Damage Suits in their latest paper.

ABSTRACT: In this work we take the case of damages actions brought by victims of antitrust violation, and refer to the current discussion originated by the EC Commission's projected reform (the 2005 Green Paper), to show some of the many failures of damages actions in performing a deterrence function, and their dependence on the specific features of each case. These problems are analysed in a conceptual framework in which three sets of choices are identified, namely those related to: (a) the definition of the illegal conducts; (b) the management of the risk; (c) the management of the consequences. We illustrate how the three groups are relatively independent of each other, and use such independence to address the (supposed) conflict between deterrence and compensation. Three possible goals of a deterrence policy are considered: discouraging all illegal conducts, discouraging only those illegal conducts which are socially inefficient, avoid deterring legal conducts which are similar to illegal ones. For each of them, the possible disparities between optimal levels of deterrence and the effects of antitrust damages actions are shown, to conclude that some consequences of the proposed boost in damages actions (especially those in terms of over-deterrence) seem overlooked in the current discussions. Moreover, we maintain that the design of the reform should not be influenced by a given preference to deterrence or to compensation as the goal to be accorded priority, since they lie theoretically on autonomous grounds. Rather, attention should be paid to the empirical interferences, that may require corrective devices as may be the case with a continuous adjustment of Public Enforcement to restore appropriate levels of deterrence once the deterrence effects of the (reformed) private damages actions are observed.

April 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Monday, April 21, 2008

Cartel Code Attributes and Cartel Performance: An Industry-Level Analysis of the National Industrial Recovery Act

Posted by D. Daniel Sokol

Jason Taylor, an economic historian at Central Michigan University undertakes some nice historical detective work in his article Cartel Code Attributes and Cartel Performance: An Industry-Level Analysis of the National Industrial Recovery Act.

ABSTRACT: This paper uses the cartel-enabling National Industrial Recovery Act (NIRA) of 1933 to gain insight into cartel performance. I employ a monthly panel of 66 industries that passed an NIRA code of fair competition to examine how specific attributes of these cartel codes affected the ability to achieve collusive outcomes. I find that output growth was significantly lower during cartel months, consistent with cartel theory, and that industries with more complex codes were more successful than those with simpler ones. Furthermore, industries with code restrictions on new productive capacity, production quotas, and requirements to file data with a central board were the most successful at reducing output, which suggests that these types of provisions were the most effective in helping firms attain collusive outcomes. Finally, I find that the effectiveness of data-filing provisions was limited to the early months of the NIRA, prior to a wave of cartel breakdown occurring in spring 1934.

April 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Loyalty Discounts and Naked Exclusion

Posted by D. Daniel Sokol

Elhaugee Einer Elhauge of Harvard Law School discusses Loyalty Discounts and Naked Exclusion in his latest working paper and takes a contrary approach to the commonly held views of this subject.

ABSTRACT: Loyalty discounts are agreements to sell at a lower price to buyers who buy all or most of their purchases from the seller. This article proves that loyalty discounts create anticompetitive effects, not only because they can impair rival efficiency, but because loyalty discounts perversely discourage discounting even when they have no effect on rival efficiency. The essential reason, missed in prior work, is that firms using loyalty discounts have less incentive to compete for free buyers, because any price reduction to win sales to free buyers will, given the loyalty discount, also lower prices to loyal buyers. This in turn reduces the incentive of rivals to cut prices, because there will exist an above-cost price that rivals can charge to free buyers without being undercut by the firm using loyalty discounts. These anticompetitive effects occur even if buyers can breach or terminate commitments, and even if the loyalty conditions require no contractual commitments and less than 100% loyalty. Further, I prove that these anticompetitive effects are exacerbated if multiple sellers use loyalty discounts. None of the results depend on switching costs, market differentiation, imperfect competition, or the loyalty discount bundling contestable and incontestable demand. Contrary to commonly held views, I prove these anticompetitive effects exist even when: (1) the price with the loyalty discount is above cost, (2) the rival has higher costs than the firm using loyalty discounts, (3) the rival prices above its own costs, (4) buyers voluntarily agree to the conditions, and (5) the discount and foreclosure levels are low. I derive formulas for calculating the inflated price levels in each situation.

April 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Trends in Retail Competition: Private Labels, Brands and Competition Policy

Posted by D. Daniel Sokol

Fourth Symposium on Trends in Retail Competition: Private Labels, Brands and Competition Policy

Tuesday 20 May 2008 12h30
Venue: St Catherine's College Mary Sunley Room
Organised by Centre for Competition Law & Policy

Private label is a growing force across Europe, present in most categories and providing a range of choice for shoppers from the value to the premium. These private label portfolios contribute to competition between retailers, differentiating one retailer from another and building store loyalty.

At the same time, the growing sophistication of private label is increasing competition with branded goods suppliers, and the rule of thumb that private labels are cheaper than brands is no longer always true.

This symposium, hosted by the Oxford Institute of European and Comparative Law in conjunction with the Centre for Competition Law and Policy and sponsored by the law firm Bristows, will explore the role of private labels in competition between retailers and between suppliers. It will consider the implications for suppliers when an important retail customer is also a major competitor and the issues posed when the retail customer has buyer power.

Programme:

12h30 Buffet lunch

13h30 Session 1
Chair - Professor Ulf Bernitz, Oxford/Stockholm Wallenberg Venture

13h45  Branded and private label product trends in European grocery markets
Patrick Falgas, Information Resources

14h10 The UK Competition Commission’s groceries investigation and the implications for competition between branded and private label products
Bob Young, Europe Economics

14h40 Member States’ approach to the Unfair Commercial Practices Directive and the impact on misleading packaging
Guiseppe Abbamonte, DG Sanco, European Commission

15h00 Coffee break

15h30 Buying alliances: what parameters are set by competition law?
Andres Font Galarza, Mayer Brown

15h50 Competition between branded and private label products: current policy and recent cases
Franco Guariglia, Barilla

16h10 United States competition law policy – the private label experience
Jeff Schmidt, United States Federal Trade Commission BR>

16h40 Roundtable discussion

18h00 Drinks Reception

bullet Programme and Registration Form are available here (Acrobat PDF file)

April 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 20, 2008

Ghosh to University of Wisconsin

Posted by D. Daniel Sokol

It is with great pleasure that I announce that co-blogger Shubha Ghosh has accepted a lateral offer at the University of Wisconsin Law School.  This is a wonderful development for Shubha (except for the cold and snowy winters).  As you all know, Shubha has done some interesting recent antitrust writing on the airline industry, comparative vertical  restraints in the US and EU and a book review of Page and Lopatka's The Microsoft Case: Antitrust, High Technology, and Consumer Welfare.  In addition to his antitrust work, Shubha is a prolific IP scholar.  In this context, I also want to note that Shubha will have a management role at the University of Wisconsin's Initiative for Studies in Technology Entrepreneurship (INSITE), which is run out of the business school.  This lateral move is a great fit for Shubha with lots of antitrust and IP-competition people for him to work with across departments including Peter Carstensen (law), Kyle Stiegert (applied economics), Jean Paul Chavas (applied econ), Guanming Shi (applied econ) and Amit Gandhi (economics).  As someone who spent two years at UW as a fellow, I think that this move will be mutually beneficial for UW and Shubha.  Congrats!

April 20, 2008 | Permalink | Comments (0) | TrackBack (0)

Should the Government Prosecute Monopolies?

Posted by D. Daniel Sokol

Maurice Stucke of the University of Tennessee Law School asks perhaps the fundamental policy question of antitrust, Should the Government Prosecute Monopolies?  Given Maurice's post-Chicago leanings, the answer is clear--yes!

ABSTRACT: In the past few years, courts and the Department of Justice have cited approvingly the Court's dicta in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP. This article analyzes why the economic thinking in Trinko is wrong, and how the Court ignores its precedent involving the Sherman Act's concerns of monopolies' political, social and ethical implications. It responds to the Court's claim that cartel behavior is easier to identify and remedy than monopolistic behavior and proposes an improvement to the Court's current rule of reason standard to reduce the risk of false positives, while enabling the antitrust agencies and courts to remedy more quickly certain monopolistic conduct.

April 20, 2008 | Permalink | Comments (0) | TrackBack (0)

Saturday, April 19, 2008

The Language of Sex and Antitrust

Posted by D. Daniel Sokol

Something in English that has not translated into other languages has been the sexualized language of antitrust- “naked” and “hard-core” cartels (although perhaps one also could make the case for “cheap talk”). I will omit discussion of “abuse of a dominant position” because of the European origin of the term. Why use these sexualized terms in the first place and what are the origins of these terms? I will leave the former and more theoretical question to the law and literature crowd. As to the latter question, I have tracked these terms in both the JLR and ALLCASES databases in Westlaw (appropriate since Thompson-West is our exclusive sponsor—click on their advertisements!). The first article in which the term “hard core” cartel appears in a law journal is an article by Rick Rule in the Antitrust Law Journal in 1985 (54 Antitrust L.J. 1121). The term “naked” restraint of trade first appeared in a 1950 Harvard Law Review note (63 Harv. L. Rev. 1400). Interestingly, though the term “hard core” cartel has appeared in 450 academic articles, it has been mentioned only twice in US cases, both in the last seven years Tritent Intern. Corp. v. Commonwealth of KY, 467 F.3d 547 (2007) and A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc., 263 F.3d 239 (2001). When I searched for a “naked” restraint of trade and/or a “naked” cartel or a “naked” market division, I found 470 cases, the oldest of which is White Motor Co. v. U.S., 372 U.S. 253 (1963). What about the use of the terms in the internet age by antitrust agencies?  As between US antitrust enforcement agencies, only DOJ can prosecute cartels, so I searched their website. They have 595 mentions of the term “hard core” cartels and 253 mentions of the term “naked.” So, it seems that academics and DOJ staff are far more into sexualized antitrust terms than judges, particularly when referring to “hard core” cartel offenses.  Interestingly, even though the FTC does not take on criminal cases, there are 9,455 mentions of the term hard core cartel on the FTC website and 16,617 mentions of naked cartels, agreements or restraints.        

April 19, 2008 | Permalink | Comments (3) | TrackBack (0)

Issue 4 of Competition Survey Journal is Out

Posted by D. Daniel Sokol

Issue 4 of th COMPETITION SURVEY: STUDIES AND RESEARCHES RELATING TO ECONOMIC COMPETITION, by the Competition Council of Romania is now out and can be downloaded below.  As my grandmother (my mother's mother) was born in Bucharest, I take particular pride in Romanian competition policy accomplishments.  More agencies around the world should be publishing journals to increase the profile of their work and to create an indigenous competition economics and legal academic and practitioner base.

Download a2020competition20survey2042020dec200720romania.pdf

 

April 19, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, April 18, 2008

New Zealand Institute for the Study of Competition and Regulation (ISCR) Looking For a New Executive Director

Posted by D. Daniel Sokol

NZ INSTITUTE FOR THE STUDY OF COMPETITION AND REGULATION                            
Pipitea Campus                          

Executive Director     

The Institute for the Study of Competition & Regulation is New Zealand's leading centre for research on the economics of competition, regulation, markets, and industrial organisation. Since its establishment in 1996 it has built an outstanding record of academic research, policy, publications, engagement and graduate supervision.     

JOB DESCRIPTION: The Executive Director has the responsibility of managing the day-to-day operation of the Institute, for the research performance of the Institute and for implementing its      strategic direction.     

JOB QUALIFICATIONS: The successful appointee should preferably have a higher degree in economics and demonstrated research record to a level that enables an appointment as, or up to, a Professor at Victoria University of Wellington. Candidates with exceptional records and promise may be considered.      Demonstrable management skills and the ability to communicate with a wide range of audiences are essential.     

APPLICATION PROCEDURE: Reference A091-08A.  Applications close 02 May 2008. For further information and to apply online visit: http://vacancies.vuw.ac.nz.

April 18, 2008 | Permalink | Comments (0) | TrackBack (0)

The Political Economy of European Merger Control: Evidence Using Stock Market Data

Posted by D. Daniel Sokol

Tomaso Duso (Humboldt University Berlin), Damien J. Neven (Graduate Institute of International Studies and DG Competition), and Lars-Hendrik Röller (European School of Management and Technology) discuss The Political Economy of European Merger Control: Evidence Using Stock Market Data in their latest article.

ABSTRACT: The objective of this paper is to investigate the determinants of European Union (EU) merger control decisions. We consider a sample of 167 EU mergers between 1990 and 2002 and evaluate their competitive consequences by the reaction of the stock market price of competitors to the merging firms. We then account for the discrepancies between the actual and optimal decisions as indicated by the stock market in terms of the political economy surrounding the cases. Our results suggest that the commission’s decisions cannot be solely accounted for as protecting consumer surplus. The institutional and political environment does matter. As far as influence is concerned, however, our data suggest that the commission’s decisions are not sensitive to firms’ interests. Instead, the evidence suggests that other factors—such as market definition and procedural aspects, as well as country and industry effects—do play a significant role.

April 18, 2008 | Permalink | Comments (0) | TrackBack (0)

Can Standard-Setting Lead to Exploitative Abuse? A Dissonant View on Patent Hold-Up, Royalty Stacking and the Meaning of FRAND

Posted by D. Daniel Sokol

Ratom_2 Geradind_1 Miguel Rato and Damien Geradin (both of Howry though Damien also heads the College of Europe's Competition Law Center) ask Can Standard-Setting Lead to Exploitative Abuse? A Dissonant View on Patent Hold-Up, Royalty Stacking and the Meaning of FRAND?

ABSTRACT: Standard-setting activities play a fundamental role in fostering innovation and competition in a variety of markets. Typically carried out by armies of engineers, they would generally not be expected to fascinate lawyers and economists. But they do - and they have recently received much attention as a result of high-profile cases, complaints lodged with competition authorities and attempts by members of standard-setting organizations to have their rules and procedures modified to prevent allegedly anti-competitive outcomes. This article aims to disprove the growing perception, largely fed by certain interest groups, that current standard-setting procedures generally based on the so-called fair, reasonable and non-discriminatory ("FRAND") licensing regime unduly allow opportunistic holders of Intellectual Property ("IP") embedded in a standard to extract excessive royalties from their licensees. First, we demonstrate that the existing FRAND regime works and that recent proposals to alter it by tilting the bargaining position of IP licensors in favour of licensees are driven by a war of business models. It is shown that such proposals are not only unnecessary, being based on false premises, but would also prove detrimental to investment and innovation. Second, we argue that excessive pricing cases under Article 82 EC should not be pursued except in a very narrow set of circumstances. Given the potential for error of any attempt to determine the competitive price of intangible assets, decisions on the appropriate royalty levels of valuable IP should be left to the market.

April 18, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 17, 2008

Facilitating Practices and Concerted Action Under Section 1 of the Sherman Act

Posted by D. Daniel Sokol

Page_big My soon to be colleague at UF Bill Page (we move next month to Gainesville) has posted a new working paper, Facilitating Practices and Concerted Action Under Section 1 of the Sherman Act.

ABSTRACT: Successful collusion requires that rivals reach consensus on the key terms and deploy some means of detecting and penalizing cheaters, usually by tracking rivals' transaction prices. Economists have shown that firms in an oligopoly can, in certain conditions, achieve noncompetitive prices and outputs without an express agreement by making choices that anticipate each others' likely responses. "Facilitating practices" are mechanisms that enhance rival firms' ability to police such an arrangement. If firms expressly agree to adopt one of these facilitating practices, for example as a trade association rule, and the effect of the practice is to reduce competition, then that agreement may be independently illegal under Section 1 of the Sherman Act. Moreover, the Sherman Act may preempt a state law that requires rivals to use a facilitating practice. A more difficult question arises, however, where the firms each adopt the same facilitating practice without any express agreement: does parallel pricing together with parallel adoption of facilitating practices allow a court to infer the requisite agreement? Both Donald Turner and Richard Posner believed that, unlike simple parallel pricing, the parallel adoption of a facilitating practice that permits noncompetitive pricing should be unlawful, because the problem of remedy is mitigated.

But conduct is not evidence of an anticompetitive agreement simply because it can be enjoined. Facilitating practices may do more than simply facilitate rivals' efforts to achieve an inefficient oligopoly price. They also may provide certain immediate benefits to consumers by, among other things, reducing search or transaction costs. In these circumstances, the firms' adoption of the practice might well be for the benign reason rather than the collusive reason. Courts will not easily infer an agreement from the parallel adoption of facilitating practices where the practices have beneficial functions apart from facilitating price coordination.

Unfortunately, the stated legal definitions of agreement under which courts evaluate circumstantial evidence, including facilitating practices, are inadequate. In this article, I review the deficiencies of the present law governing the definition and proof of agreement under Section 1 and propose that the law should recognize that communication among rivals is necessary for concerted action. I then examine cases involving facilitating practices in a variety of Section 1 contexts, and suggest that the courts have come to recognize the importance of communications among rivals in evaluating whether the evidence warrants an inference of agreement.

April 17, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 16, 2008

Second Annual Conference on Competition Law, Economics and Policy in South Africa

Posted by D. Daniel Sokol

The Second Annual Competition Commission, Competition Tribunal and Mandela Institute Conference on Competition Law, Economics and Policy in South Africa will be held on Friday, 6 June 2008 at the Chalsty University of the Witwatersrand in Johannesburg.  Details are available here.

April 16, 2008 | Permalink | Comments (0) | TrackBack (0)

Abolishing the Price Squeeze as a Theory of Antitrust Liability

Posted by D. Daniel Sokol

SidakGreg Sidak of Georgetown Law School and Criterion Economics suggests that the US Supreme Court should undertake an effort at Abolishing the Price Squeeze as a Theory of Antitrust Liability.

ABSTRACT: A “price squeeze,” or “margin squeeze,” is a theory of antitrust liability that concerns the pricing practices of a vertically integrated monopolist that sells its upstream bottleneck input to firms that compete with the monopolist in the production of a downstream product sold to end users. At issue is the size of the margin between the input price and the price that the monopolist charges in the downstream market for the end product incorporating that particular input.

Trinko, it should go without saying that a “squeeze” that neither causes nor threatens the monopolization of an identifiable market cannot pass muster under section 2 of the Sherman Act. Trinko established a rule that a monopolist’s refusal to deal with a competitor does not state an antitrust violation “where there has been no prior course of voluntary dealings between the parties.” Further, Brooke Group instructs that courts should not discourage “a price cut” that “forces firms to maintain supracompetitive prices, thus depriving consumers of the benefits of lower prices.”

The fountainhead of antitrust’s pre-Trinko price-squeeze jurisprudence is Judge Learned Hand’s 1945 opinion in Alcoa. Under Alcoa, a vertically integrated monopolist must charge downstream competitors not more than a “fair price” for its bottleneck input, and it must charge end users a retail price for its downstream product that is high enough to ensure that its competitors can match that price and still make a “living profit.” A new generation of antitrust price-squeeze cases in the telecommunications industry rests upon the Alcoa model of price-squeeze antitrust liability, and has divided the U.S. Courts of Appeals.

The D.C. Circuit has properly concluded that because under the antitrust laws a vertically integrated monopolist retains the greater power to refuse to provide its upstream inputs to its downstream competitors, it naturally retains the lesser power to raise the price of its upstream inputs without incurring antitrust liability. On the other hand, through its decision in linkLine, the Ninth Circuit permitted a price-squeeze theory to survive a motion for judgment on the pleadings. The Ninth Circuit’s analysis implies (1) that the primary concern in price-squeeze cases is not consumers, but competitors, and (2) that, in the American setting, the requisite analysis more resembles the work of a public utilities commission than that of a federal judge presiding over an antitrust case.

The price squeeze theory is incompatible with contemporary antitrust jurisprudence as well as economic principles. A price squeeze by a firm lacking market power cannot possibly rise to the level of an antitrust violation because it has no chance of reducing consumer welfare. Further, the antitrust laws are concerned with the competitive process, not its end results. The inability of a single firm to stay in business is irrelevant as a matter of antitrust law unless the behavior inducing that firm to exit the market also harms the competitive process. Price-squeeze liability also discourages investment, retail price competition, and the voluntary provision of inputs on negotiated terms by vertically integrated monopolists to current and potential rivals otherwise unable to obtain or self-provide them. Finally, a price squeeze is a regulatory issue, which makes sense only as a rule of price regulation in an industry already subject to duties to deal and to control by institutionally competent regulators.

The Supreme Court should resolve the dispute among the circuits and clarify that the proper response to a price-squeeze allegation is a regulatory undertaking, not an antitrust cause of action. The price-squeeze theory of antitrust liability provides courts and litigants an excuse to depart from Trinko, Brooke Group, or both by recasting claims appropriately analyzed as refusal-to-deal cases or predation cases as something different—price-squeeze” claims. It is timely for the Supreme Court to revisit Alcoa and to explain why alleging a price squeeze neither states a claim in American antitrust law nor justifies deviation from the principles announced in Brooke Group and Trinko.

April 16, 2008 | Permalink | Comments (0) | TrackBack (0)

Oxford Centre for Competition Law & Policy Round Table Discussion - Article 82 EC

Posted by D. Daniel Sokol

Oxford's Centre for Competition Law & Policy will host a Round Table Discussion on Article 82 EC.  Speakers include:

Dr Gunnar Niels, OXERA, on ‘Economic effects-based tests and legal (un)certainty under Article 82’
Dr Ioannis Lianos, University College London, on ‘Classification of abuses in Article 82 EC: a straight story?’
Dr Ariel Ezrachi, CCLP, on ‘Private enforcement and Article 82 EC’
Prof. Steve Anderman, University of Essex, on ‘The essential facilities reasoning in Article 82 and IPRs’.
Prof Ulf Bernitz, IECL, on ‘The sanction of voidness under Article 82 EC and possible contractual consequences’
Dr Dan Eklöf, Stockholm University, on ‘The Microsoft judgment’

April 16, 2008 | Permalink | Comments (0) | TrackBack (0)

Post Merger Product Repositioning

Posted by D. Daniel Sokol

Maybe mergers are not as anti-competitive as we might otherwise assume.  This is a finding in an excellent new article by Amit Gandhi (Department of Economics, University of Wisconsin-Madison), Luke Froeb (Owen Graduate School of Management, Vanderbilt University), Steven Tschantz (Department of Mathematics, Vanderbilt University) and Greg Werden (DOJ Antitrust) on Post Merger Product Repositioning.

ABSTRACT: This paper analyzes the effects of mergers between firms competing by simultaneously choosing price and location. Products combined by a merger are repositioned away from each other to reduce cannibalization, and non-merging substitutes are, in response, repositioned between the merged products. This repositioning greatly reduces the merged firm's incentive to raise prices and thus substantially mitigates the anticompetitive effects of the merger. Computation of, and selection among, equilibria is done with a novel technique known as the stochastic response dynamic, which does not require the computation of first-order conditions.

April 16, 2008 | Permalink | Comments (0) | TrackBack (0)