Tuesday, March 22, 2011

Thoughts on AT&T/T-Mobile Merger and the Breakup Fee

Posted by D. Daniel Sokol

The thing that jumps out at me is a $3 billion break up fee to T-Mobile. This means in my mind that any merger challenge will be fully litigated out. That is, the parties seem to have lots of confidence in the merger. Personally, I am not convinced it is such a slam dunk. Put differently, I would love to be the lead attorney of the government case because this is the kind of case (where I give the government a 55-45 chance of winning the antitrust case) that can make a government lawyer's career.

But is a success by the merging parties actually a success? If a "success" means the deal goes through, I would suggest we redefine what success means as it may come at the expense of significant divestitures imposed either by DOJ or the FCC (hello Jon Baker) -- assuming that the parties can find someone who can buy the divested assets.

The session break hallway discussions at the ABA Antitrust Section Spring Meeting next week will be a lot more lively than I would have anticipated just three days ago. I also think this deal seems to be employing lots of attorneys in DC for the merging parties and other interested parties.

March 22, 2011 | Permalink | Comments (2) | TrackBack (0)

Judge Chin Says No to Google Books Settlement

Posted by D. Daniel Sokol

Judge Chin says no to the Google Books Settlement. The opinion is here.

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

In Search of a Competition Law Fit for Developing Countries

Posted by D. Daniel Sokol

Eleanor M. Fox, New York University School of Law is In Search of a Competition Law Fit for Developing Countries.

ABSTRACT: What form of antitrust (competition) law is fitting for regional free trade areas comprised of developing countries? This article explores the question by tackling, first: Are there special characteristics of developing countries indicating their need for a competition law different from emerging international standards, and if so what are these characteristics and what salient focal points provide a framework for law sympathetic with economic development? The article argues that there are such special needs, and it explores models that respond to those needs. It suggests a metric of efficient inclusive development. In any event, the article argues for a voice of developing countries in choosing their model - which could turn out to correspond or not with the formulations of law in the developed world. Blueprint transplants may be fitting; they may not be fitting; they may fit well enough so that developing countries choose not to incur the costs of difference. The key point is knowledgeable choice. Finally, the article explores how a regional setting can make a difference. It can help overcome problems of effectiveness, and harmful exercises of power by the state and vested interests; but it presents new challenges of effectiveness that must be overcome.

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Using Spectrum Auctions to Enhance Competition in Wireless Services

Posted by D. Daniel Sokol

Peter C. Cramton, University of Maryland - Department of Economics, Evan Kwerel, Gregory L. Rosston, Stanford Institute for Economic Policy Research, and Andrzej Skrzypacz, Stanford Graduate School of Business advocate Using Spectrum Auctions to Enhance Competition in Wireless Services.

ABSTRACT: Spectrum auctions are used by governments to assign and price licenses for wireless communications. Effective auction design recognizes the importance of competition, not only in the auction, but in the downstream market for wireless communications. This paper examines several instruments regulators can use to enhance competition and thereby improve market outcomes.

 

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Tying: Understanding Leverage, Foreclosure, and Price Discrimination

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law has written a very clear and insightful Tying: Understanding Leverage, Foreclosure, and Price Discrimination.

ABSTRACT: Many tying arrangements are used by firms that do not have substantial market power in either of the two markets linked together by the tie. Their function must be something other than the enlargement or perpetuation of power. A few ties do involve fairly explicit exercises of market power, but they need not be used for a different purpose than the ties imposed by more competitive firms. This paper considers firms’ use of ties to exploit whatever power they already have over the tying product. The "leverage" theory saw ties as exploiting customers as a group via higher prices, whether or not the tie excluded any rival. By contrast, the foreclosure theory of ties focused on exclusion of rivals, mainly in the tied product market, with extension or perpetuation of monopoly as a long term goal.

Clearly the dominant explanation for variable proportion ties is price discrimination, although it explains some fixed proportion ties as well. Like leveraging, price discrimination also results in some customer exploitation, although with much more complex results than the leverage theory assumed. Also like leveraging, a tying firm can profit from price discrimination without foreclosing any rival. Indeed, even firms without relatively small amounts of tying product market power can use price discrimination ties. Although a price-discriminating tie might cover most purchasers of a tied product and thus foreclose a substantial share of the tied market, effective price discrimination neither requires nor typically generates a significant foreclosure or other impairment of the tied market's structure or performance. Indeed, in many litigated cases the tying product was a common commodity such as dry ice, salt, or ordinary printing ink.

The least warrant for antitrust intervention occurs when higher tied product prices fail to result from foreclosure of rivals and are not reflected in higher consumer prices. For example, most franchise and many complementary product ties (1) fail to foreclose any rival from anything because the tied product is a common ingredient or other common expendable input; and also (2) fail to result in higher consumer prices for the tying/tied combination because the firm is in competition with other firms and could not assess a monopoly price increase. The last conclusion is true even though a price discrimination tie typically results in higher prices for the tied product alone.

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition Law and the Enforcement of Article 102

Posted by D. Daniel Sokol

Edited by Federico F. Etro (University of Milan - Econ) and Ioannis I. Kokkoris (University of Reading - Law) are editors of Competition Law and the Enforcement of Article 102.

BOOK ABSTRACT: With incisive and thought-provoking contributions from both leading academics and practitioners, this book addresses in detail the major areas in relation to the Commission Guidance Paper on Applying Article 82 of the EC Treaty (now Article 102). The paper has been at the center of much of the recent debate on antitrust policy in Europe and has generated significant controversy and intense debate. The authors contend that the guidance from the Commission is on the one hand entirely justifiable in its focus on consumer harm in identifying what constitutes an abuse, but that on the other it is not consistent enough in its message, nor indeed does it offer enough structural guidance on the practical application of the approach. The book addresses all of these concerns, considers the reform of article 102, and identifies the challenges inherent in its enforcement, looking for instance at enforcement in certain sectors, such as the high tech sector. The book considers recent seminal antitrust cases such as the Microsoft case to illuminate and better understand abuse of dominance. It brings a line of clarity to often contradictory messages and in so doing provides invaluable practical guidance to enforcers and practitioners alike.

The editors combine the insight of a leading international economist and an experienced antitrust scholar, and the contributions are linked by a common emphasis on a strong economic approach to antitrust enforcement. 

Table of Contents

1. Toward an Economic Approach to Article 102 , Federico Etro & Ioannis Kokkoris 2. Does the Guidance Paper on Article 102 Matter? , Damien Geradin 3. Some outstanding issues from the European Commission's Guidance on Article 102: Not-so-faint echoes of Ordoliberalism , Philip Marsden 4. Optimal Enforcement and Decision Structures for Competition Policy: Economic Considerations , Yannis Katsoulacos & David Ulph 5. IP Rights in the EU-Microsoft Saga , Assimakis Komninos & Katarzyna Czapracka 6. Judicial Review in Article 102 , Jean-Yves Art & Pablo Ibanez Colomo 7. The assessment of efficiencies under Article 102 and the Commission's Guidance Paper , Denis Waelbroeck 8. Will Efficiencies Play an Increasingly Important Role in the Assessment of Conduct Under Article 102? , Jean-Francois Bellis & Tim Kasten 9. Is there a Gap in the Enforcement of Article 102? , Ioannis Kokkoris 10. Is the availability of 'appropriate' remedies a limit to competition law liability under Article 102? , Ioannis Lianos 11. Damages for exclusionary practices: a primer , Chiara Fumagalli, Jorge Padilla & Michele Polo

Table of Contents

1. Toward an Economic Approach to Article 102 , Federico Etro & Ioannis Kokkoris
2. Does the Guidance Paper on Article 102 Matter? , Damien Geradin
3. Some outstanding issues from the European Commission's Guidance on Article 102: Not-so-faint echoes of Ordoliberalism , Philip Marsden
4. Optimal Enforcement and Decision Structures for Competition Policy: Economic Considerations , Yannis Katsoulacos & David Ulph
5. IP Rights in the EU-Microsoft Saga , Assimakis Komninos & Katarzyna Czapracka
6. Judicial Review in Article 102 , Jean-Yves Art & Pablo Ibanez Colomo
7. The assessment of efficiencies under Article 102 and the Commission's Guidance Paper , Denis Waelbroeck
8. Will Efficiencies Play an Increasingly Important Role in the Assessment of Conduct Under Article 102? , Jean-Francois Bellis & Tim Kasten
9. Is there a Gap in the Enforcement of Article 102? , Ioannis Kokkoris
10. Is the availability of 'appropriate' remedies a limit to competition law liability under Article 102? , Ioannis Lianos
11. Damages for exclusionary practices: a primer , Chiara Fumagalli, Jorge Padilla & Michele Polo

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, March 21, 2011

Chambers Global 2011 Rankings Are Out - And the Top Global Antitrust/Competition Law Practices Are...

Posted by D. Daniel Sokol

The top "global" antitrust/competition law practices as ranked by Chambers for 2011 are:

Band 1

Cleary Gottlieb Steen & Hamilton LLP

Band 2

Arnold & Porter LLP
Freshfields Bruckhaus Deringer LLP

Band 3

Clifford Chance LLP
Jones Day
Linklaters
Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates

Band 4

Allen & Overy LLP
Latham & Watkins LLP
White & Case LLP

Band 5

Gibson, Dunn & Crutcher LLP
Hogan Lovells
O'Melveny & Myers LLP
WilmerHale

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis

Posted by D. Daniel Sokol

Jonathan B. Baker, American University - Washington College of Law has posted Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis.

ABSTRACT: The FCC’s analysis of the Comcast-NBCU transaction fills a gap in the contemporary treatment of vertical mergers by providing a roadmap for courts and litigants addressing the possibility of anticompetitive exclusion. The FCC identified the factors any judicial or administrative tribunal would likely consider today in analyzing whether a vertical merger would lead to anticompetitive input or customer foreclosure, and a range of economic methods potentially relevant to applying that template to the facts of a transaction. Notwithstanding the difference between administrative adjudication under a public interest standard and judicial decision-making under the Clayton Act, the legal framework and economic studies the Commission employed promise to influence the approach that antitrust tribunals will now take in evaluating vertical mergers.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Brown Shoe Versus the Horizontal Merger Guidelines

Posted by D. Daniel Sokol

Keith N. Hylton, Boston University discusses Brown Shoe Versus the Horizontal Merger Guidelines.

ABSTRACT: The new Horizontal Merger Guidelines, if treated by courts as a source of law, would reduce the discretion traditionally exercised by courts in defining relevant markets and market power in merger cases. This is an undesirable shift in the balance of power because courts have used the market power inquiry stage of merger analysis as a general checkpoint or weigh station for evaluating factors relevant to the welfare effects of a merger.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

A Short Note on Methodology: An Eclectic and Heuristic Multi-Disciplinary and Functional Approach to EU Law

Posted by D. Daniel Sokol

Albert Sanchez Graells, Pontifical University Comillas of Madrid provides A Short Note on Methodology: An Eclectic and Heuristic Multi-Disciplinary and Functional Approach to EU Law.

ABSTRACT: This short note on methodology has been extracted from my PhD thesis, which deals with the relationship between public procurement and competition policy at the EU level (a reworked version has been recently published as Public Procurement and the EU Competition Rules, Oxford: Hart Publishing, 2011). Therefore, the following pages will explore the methodology chosen to conduct a study that mainly aimed to answer the following research question: How can and should publicly-generated competitive distortions in the public procurement field be addressed under EU economic law and, particularly, under the general framework of competition and public procurement law? In order to address such a macro-legal question (and the implied micro-legal questions), I opted for an eclectic and heuristic multi-disciplinary and functional approach to EU Law. The following pages develop the reasons behind such an option which, it must be stressed, was strongly conditioned by the aim of my research. Hopefully, however, the justification for such a methodology will serve as a (limited) case study for researchers approaching similar topics related to EU Law.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Announcing Global Economics Group

Posted by D. Daniel Sokol

Worth noting is a new antitrust consulting practice led by David Evans called Global Economics Group. The first thing that I notice is a deep strength on Chinese competition law and economics in addition to a very strong US team.

From the press release:

Three top economic experts today announced the formation of Global Economics Group, an economic consulting firm that will provide independent economic analysis in difficult legal, regulatory and policy matters globally. David S. Evans, one of the world’s leading antitrust economists; Roger Hickey, founder of Chicago Partners; and Chad Coffman, a noted securities expert, will serve as Chairman, CEO, and President, respectively. The firm’s partner roster includes economists Robert Litan, former U.S. Deputy Assistant Attorney General for Antitrust, and Richard Schmalensee, who served on the President’s Council of Economic Advisers from 1989-1991.

GlobalEcon’s practice groups will specialize in antitrust, financial regulation, securities and valuation, labor/employment discrimination, intellectual property, business damages, and tax and transfer pricing. “We’re building a firm squarely focused on helping clients navigate complex litigation and regulatory problems in a global economy,” said Evans. “The mix of experts we have assembled so far is truly world-class; they have demonstrable track records of bringing unique and relevant insights to help clients build compelling fact-based arguments in adversarial situations.” “We bring enormous experience to the table on day one of the firm,” said Hickey. “GlobalEcon’s partners have worked on some of the most complex legal matters of the past 20 years, including the Microsoft antitrust cases, Enron securities fraud, the YouTube copyright infringement case, and the Wal-Mart employment discrimination class action, among other high-profile legal issues.”

In the wake of the 2008 financial crisis, the firm’s experts have been deeply involved in financial regulatory reform, including derivatives regulation, the role of the financial exchanges, consumer financial protection and payments regulation. GlobalEcon’s partners also have been involved in some of the largest securities fraud cases evolving from the crisis. In addition to econometricians, statisticians and financial analysts, the firm includes a number of experts with deep experience in testifying before legal and regulatory bodies worldwide. GlobalEcon experts have worked on a number of multi-jurisdictional matters, including cases in the U.S., EU, Brazil, Mexico, China, Singapore, Korea, and Australia.

GlobalEcon’s team includes: • Richard Schmalensee, Dean Emeritus of the Sloan School at MIT, former member of the President’s Council of Economic Advisers, and currently Howard W. Johnson Professor of Economics and Management at MIT; • Robert Litan, former Deputy Assistant Attorney General for Antitrust, former Associate Director of the Office of Management and Budget, and currently Senior Fellow at Brookings Institution and vice president at the Kaufman Foundation; • Todd Zywicki, former Director of the Office of Policy and Planning at the Federal Trade Commission and currently George Mason University Foundation Professor of Law. • Craig Pirrong, a globally recognized expert on derivatives and exchanges who now leads the Global Energy Management Institute at the University of Houston where he is also a professor; • Robert Ian McEwin, former chief economist of the Competition Commission of Singapore and currently member of the Singapore Copyright Tribunal and Professor of Law and Singapore National University; • Xinzhu Zhang, Professor at the Chinese Academy of Social Sciences and advisor to the Chinese State Council, the Anti-Monopoly Bureau of Ministry of Commerce and the World Bank; and, • Abel Mateus, former chairman of the Portuguese Competition Authority and member of the Monetary Committee and Economic Policy Committee of the European Commission. Evans, GlobalEcon’s Chairman, was a top executive at NERA Economic Consulting before he was recruited by LECG in 2004 to lead its global competition policy practice, one of the world’s largest antitrust economics groups. He has led teams of experts and testified on some of the most prominent antitrust cases on record including U.S. v. AT&T, U.S. v. Microsoft, VisaCheck/MasterMoney Antitrust Litigation, and the European Commission v. Microsoft. Evans holds teaching positions at the University of Chicago and the University College London.

Hickey, GlobalEcon’s CEO,was the founder and CEO of Chicago Partners, a top U.S. economic consulting firm sold to Navigant in 2008. He has led large teams on valuation, securities and intellectual property matters. Coffman, GlobalEcon’s President, has a national securities and valuation practice and has served as an expert in some of the largest securities cases on record, including Tyco, Parmalat, Enron, and WorldCom, among others. He is frequently retained by mediators and arbitrators to serve as the neutral expert. Together with Hickey, he founded Winnemac Consulting, which will be absorbed into Global Economics Group, to be based in Chicago.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China

Posted by D. Daniel Sokol

Terence Tai Leung Chong, Chinese University of Hong Kong (CUHK) - Department of Economics, Liping Lu, Tilburg University - CentER, European Banking Center(EBC), and Steven R. G. Ongena, Tilburg University - CentER, European Banking Center (EBC), ask Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China.

ABSTRACT: Banking competition may enhance or hinder the financing of small and medium enterprises (SMEs). Using a survey on the financing of China’s SMEs combined with detailed bank branch information, we investigate how concentration in the local banking market affects the availability of credit. It is found that lower market concentration alleviates financing constraints. The unconcentrated presence of joint stock banks has a larger effect on alleviating credit constraints, while the presence of state-owned banks has a smaller effect, than the presence of city commercial banks.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Saturday, March 19, 2011

Discretion and Prioritisation in Public Antitrust Enforcement, in particular EU antitrust enforcement

Posted by D. Daniel Sokol

Wouter P. J. Wils, European Commission, King's College London - School of Law has posted Discretion and Prioritisation in Public Antitrust Enforcement, in particular EU antitrust enforcement.

ABSTRACT: This paper discusses discretion and prioritisation in public antitrust enforcement, in particular in the enforcement of EU antitrust law. First, the paper defines the notion of discretion and discusses the rationale of discretion. Second, it examines the enforcement of Articles 101 and 102 TFEU by the European Commission, showing that the Commission has a broad discretion concerning the question which suspected or alleged infringements to pursue, but no discretion as to the content of the antitrust prohibitions. With regard to fines, the Commission has a significant degree of discretion, although this discretion is potentially neutralised by the General Court's unlimited jurisdiction. Third, a brief comparison is made with and between the competition authorities of the EU Member States, highlighting divergence as to discretion to set priorities. The last chapter of the paper sets out various reasons for allowing competition authorities discretion to set priorities as to which cases of suspected or alleged infringements of the antitrust prohibitions they investigate and pursue, as well as a number of risks related to prioritisation.

March 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, March 18, 2011

Norwegian Centre for Competition Policy will be established in Bergen

Posted by D. Daniel Sokol

A press release reports:

– Our ambition is to make Bergen a capital for competition policy – not only in Norway but in the Nordic countries and in time perhaps in Europe, said the Director General for Competition, Knut Eggum Johansen.

During a seminar on March 17, he presented the plans to establish a national centre for competition policy in collaboration with the University of Bergen (UiB) and the Norwegian School of Economics and Business Administration (NHH).

At the same time, the Minister for Government Administration, Reform and Church Affairs Rigmor Aasrud announced that the Ministry is prepared to support the start of the centre with NOK 500 000. 

– The conditions for building up a national centre for competition policy in Bergen are very good, said Aasrud. She points out that Bergen has an extensive academic environment with an interest in and knowledge of competition economics and competition law.

Result of the move
The establishment of the centre can be seen as a result of the move by the Competition Authority from Oslo to Bergen. The Director points out that the interaction and cooperation between the Authority and the academic environment at UiB and NHH has always been very good. 

– Competition policy is interdisciplinary, and it is important to ensure the interaction between the fields of law and economics. The new centre will build on the expertise that already exists at UiB, NHH and the Competition Authority, said Eggum Johansen.

Interdisciplinary
The Bergen Centre for Competition Law and Economics (BECCLE) will, among other things, collect the permanent academic staff at UiB and NHH, postdocs and PhD students working on competition policy issues into a single environment. The centre will play an active role both in research and education and by organizing seminars and conferences in the field of competition policy.

The news about the centre was released at a seminar organized by the Competition Authority in connection with the end of Knut Eggum Johansen’s term as Director General for Competition at the end of March.

 

March 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models

Posted by D. Daniel Sokol

Sebastian von Engelhardt, University of Jena - Economics Department has written on Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models.

ABSTRACT: In the ICT sector, product-software is an important factor for the quality of the products (e.g. cell phones). In this context, open source software enables firms to avoid quality competition as they can cooperate on quality without an explicit contract. The economics of open source (OS) versus closed source (CS) business models are analyzed in a general two-stage model that combines aspects of non-cooperative R&D with the theory of differentiated oligopolies: In stage one, firms develop software, either as OS or CS, or as a an OS-CS-mix if the license allows. In stage two, firms bundle this with complementary products and compete à la Cournot. The model allows for horizontal product differentiation in stage two. The finding are: 1.) While CS-decisions are always strategic substitutes, OS-decisions can be strategic complements. Furthermore, CS is a strategic substitute to OS and vice versa. 2.) The type of OS-license plays a crucial role: only if the license prohibits a direct OS-CS code mix (like the GPL), then Nash-equilibria with firms producing OS code exist for all parameters. 3.) In the equilibrium of a mixed industry with restricted licenses, OS-firms offer lower quality than their CS-rivals.

March 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Entry and Exit of Physicians in a two-tiered public/private Health Care System

Posted by D. Daniel Sokol

Martin Gächter (University of Innsbruck, Department of Economics and Statistics), Peter Schwazer (Johannes Kepler University of Linz, Department of Economics), and Engelbert Theurl (University of Innsbruck, Department of Economics and Statistics) describe the Entry and Exit of Physicians in a two-tiered public/private Health Care System.

ABSTRACT: Firm turnover has recently attracted increased interest in economic research. The entry of new firms increases competition and promises efficiency gains. Moreover, changes in the market structure influence productivity growth, because firm entry usually leads to increased innovation. The health care market exhibits important differences as compared to other markets, including various forms of market failure and, as a consequence, extensive market regulation. Thus, the economic effects of entries and exits in health care markets are less obvious. The following paper studies the determinants of entry and exit decisions of physicians in the private sector of the outpatient part of the Austrian health care system. We apply a Poisson panel estimation to a data set of 2,379 local communities and 121 districts in Austria in the time period 2002 - 2008. We are particularly interested in the question how public physicians (GPs/specialists) and their private counterparts influence the entrance and exit of private physicians. We find a significantly negative effect of existing capacities, measured by both private and public physician density of the same specialty, on the entry of new private physicians. On the contrary, we find a significantly positive effect of private GPs on the entry of private specialists. Interestingly, this cooperation/network effect also works in the other direction, as a higher density of private specialists increases the probability of the market entry of private GPs. Based on the results of previous literature, we thus conclude that private physicians establish networks to cooperate in terms of mutual referrals etc. Our estimations for market exits basically confirm the entry results, as higher competitive forces positively influence the market exit of private physicians.

March 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Evaluating Innovation and Moral Hazard in Pharmaceuticals

Posted by D. Daniel Sokol

Paris Cleanthous (University of Cyprus - Econ) is Evaluating Innovation and Moral Hazard in Pharmaceuticals.

ABSTRACT: This paper formulates an empirical methodology that evaluates pharmaceutical innovation in the American antidepressant market by quantifying patient welfare benefits from innovation. While evaluating pharmaceutical innovation in antidepressants, I uncover and address the moral hazard issue that arises due to the existence of prescription drug insurance coverage. A combination of market-level data, drug and patient characteristics are used to estimate demand for all antidepressants between 1980 and 2001. The paper estimates large and varied patient welfare gains due to innovation and helps explain a detected divergence between social and private patient benefits by the existence of insurance.

March 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 17, 2011

Endogenous Timing in a Mixed Duopoly: Wighted Welfare and Price Competition

Posted by D. Daniel Sokol

Juan Carlos Barcena-Ruiz (Universidad del País Vasco) and Maximo Sedano (Universidad del País Vasco) address Endogenous Timing in a Mixed Duopoly: Wighted Welfare and Price Competition.

ABSTRACT: In this paper we analyse the endogenous order of moves in a mixed duopoly for differentiated goods. Firms choose whether to set prices sequentially or simultaneously. The private firm maximises profits while the public firm maximises the weighted sum of the consumer and producer surpluses (wighted welfare). It is shown that the result obtained in equilibrium depends crucially on the weigth given to the consumer surplus in weighted welfare and on the degree to which goods are substitutes or complements. We also anlyse whether the equilibria obtained maximise the sum of the consumer and producer suspluses or not. Finally we study whether the nationality of the private firm influences the results.

March 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Quality competition with profit constraints: Do non-profit firms provide higher quality than for-profit firms?

Posted by D. Daniel Sokol

Kurt R. Brekke (Department of Economics and Helth Economics Bergen, Norwegian School of Economics and Business Administration), Luigi Siciliani (Department of Economics and Centre for Health Economics, University of York, Heslington), and Odd Rune Straume (Universidade do Minho - NIPE) ask Quality competition with profit constraints: Do non-profit firms provide higher quality than for-profit firms?

ABSTRACT: In many markets, such as education, health care and public utilities, firms are often profit-constrained either due to regulation or because they have non-profit status. At the same time such firms might have altruistic concerns towards consumers. In this paper we study semi-altruistic firms’ incentives to invest in quality and cost-reducing effort when facing constraints on the distribution of profits. Using a spatial competition framework, we derive the equilibrium outcomes under both quality competition with regulated prices and quality price competition. Profit constraints always lead to lower cost-efficiency, whereas the effects on quality and price are ambiguous. If altruism is high (low), profit-constrained firms offer higher (lower) quality and lower (higher) prices than firms that are not profit-constrained. Compared with the first-best outcome, the cost-efficiency of profit-constrained firms is too low, while! quality might be over- or underprovided. Profit constraints may improve welfare and be a complement or substitute to a higher regulated price, depending on the degree of altruism.

March 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Baker on FCC Merger Review Process

Posted by D. Daniel Sokol

Jon Baker (FCC/American University) has a great post on the FCC’s Merger Review Process.

March 17, 2011 | Permalink | Comments (0) | TrackBack (0)