Monday, April 25, 2011

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

Posted by D. Daniel Sokol

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

Friday 3 June 2011

bullet Venue: Centre for Competition Law & Policy

Organised by Centre for Competition Law & Policy in conjunction with Oxford Institute of European and Comparative Law

The grocery sector in Europe, arguably the most important for consumers, is facing unprecedented challenges in terms of climate change, higher global demand for food and increasing pressure on finite resources. At the same time consumers expect access to a wide range of products at competitive prices from a choice of outlets.

The policy implications underlying these challenges are growing in importance. The sector is coming under greater scrutiny at both European and national levels, in terms of the health of the supply chain and both retail and product competition in the marketplace. Such scrutiny provides a backdrop to this symposium which looks in particular at relationships between retailers and suppliers, competition between branded and private label products and the implications for shoppers. Competition between private labels and branded goods differs in important respects from the usual head-to-head competition between suppliers arising from the retailer?s dual role, with the retailer being at the same time important retail customer and direct (product) competitor.Meanwhile, competition authorities have expressed concerns over some adverse effects of buyer power, notably the transfer of excessive risks and unexpected costs to suppliers, undermining investments in product quality, range and innovation.

This symposium, the seventh to be hosted by the Oxford Institute of European and Comparative Law in conjunction with the Centre for Competition Law & Policy and sponsored by the law firm Bristows, will explore these issues and their implications for shoppers. The programme features two roundtable discussions, presenting an opportunity to hear from national competition authorities and officials. The event will be held under the Chatham House Rule1.

There is no charge to attend.

bullet For the full programme and registration information, click here (Acrobat PDF file)

April 25, 2011 | Permalink | Comments (0) | TrackBack (0)

The Next Big Question in Competition Law: How do we Treat Buyer Power?

Posted by D. Daniel Sokol

Paul Nihol (UC Louven) and Thomas Lübbig (Freshfields) ask The Next Big Question in Competition Law: How do we Treat Buyer Power?

ABSTRACT: significant number of antitrust issues have now been settled, with many practitioners and observers agreeing on how anticompetitive practices should be addressed around the globe. For instance, there is no discussion about the necessity to act severely against cartels. The rules on horizontal mergers have become similar, or demonstrate little difference, on both sides of the Atlantic. Some questions remain on resale price maintenance or the extent to which economics should be introduced in the analysis of dominance. But these issues, while not being minor, call for a refinement, not an overhaul, of current rules. This is probably the right moment for the next big question to emerge.

April 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Exclusive Dealing: Single-Product Discounting, Slotting Allowances, and Related Practices

Posted by D. Daniel Sokol

Herb Hovenkamp (Iowa Law) has posted Exclusive Dealing: Single-Product Discounting, Slotting Allowances, and Related Practices.

ABSTRACT: A firm's discounting policies over a single product raise exclusive dealing concerns in two situations. First, the firm may offer quantity discounts whose effect is to induce customers to take most of their requirements for a given product from the defendant. In addition, a firm may employ “slotting” fees or similar allowances paid by manufacturers to retailers, with the possible result that rivals have difficulty obtaining access to shelf space.

Most quantity discount programs are undoubtedly designed to reflect the reduced costs of larger transactions. But suppose that a discounting program is clearly in excess of anything justified by significant savings. For example, suppose that the program gives incremental discounts stretching up to very large volumes and permits the aggregation of all purchases over a lengthy period, say one year. If exclusive dealing under equivalent structural conditions and subject to equivalent defenses were lawful, the discount arrangement should be lawful as well. But the competitive impact must in fact be less because any equally efficient rival can take the customer by bidding a better price and even compensating the customer for the loss of the discount from the defendant.

Some discounts take the form of upfront payments from producers to grocers or other retailers for access to the retailer's shelf space. For example, a grocer may wish to allocate scarce display space to only two of the three major brands of prepared baby food. These allowances are generally paid to retailers in order to induce them to carry and display a product whose prospects are uncertain to the retailer. The special characteristic of the slotting allowance that gives it this risk-transferring property is that it is a discount that diminishes as the volume of goods sold increases, effectively making the supplier share in the risk that a product will not succeed at retail.

Challenges to above cost discounting, where the engine of exclusion is price, must meet more severe structural requirements than exclusive dealing. Indeed, predatory pricing is a “monopolization” offense requiring significant market shares in at least the 60-70% range, and it would be perverse to assess stricter structural requirements in cases involving below cost pricing than in those challenging prices that are above cost.

April 25, 2011 | Permalink | Comments (0) | TrackBack (0)

The Determination of Optimal Fines in Cartel Cases: The Myth of Underdeterrence

Posted by D. Daniel Sokol

Marie-Laure Allain, Ecole Polytechnique, Paris - Laboratoire d'Econometrie, Marcel Boyer, University of Montreal - Department of Economics, Center for Interuniversity Research and Analysis on Organization (CIRANO), Rachidi Kotchoni, Laval University - CRÉA, and Jean Pierre Ponssard, Ecole Polytechnique, Paris - Laboratoire d'Econometrie have an interesting new paper on The Determination of Optimal Fines in Cartel Cases: The Myth of Underdeterrence.

ABSTRACT: The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide a game theoretic discussion of the restitution and deterrence properties of fines static and dynamic frameworks: cartel stability depends on their ability to prevent deviation by firms and the benefit of a deviation depends on the fines to be imposed in case of detection by the antitrust authority. We show that the proper consideration of the dynamics of competition has a major impact on the determination of optimal dissuasive fines: our results suggest that a clear majority of fines imposed by the European Commission in recent years meet the deterrence objective.

April 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Estimating the Lock-in Effects of Switching Costs from Firm-Level Data

Posted by D. Daniel Sokol

Gabor Kezdi (Institute of Economics Hungarian Academy of Sciences) and Gergely Csorba (Institute of Economics Hungarian Academy of Sciences) have a paper Estimating the Lock-in Effects of Switching Costs from Firm-Level Data.

ABSTRACT: This paper proposes a simple method for estimating the lock-in effects of switching costs from firm-level data. We compare the behavior of already contracted consumers to the behavior of new consumers as the latter can serve as contrafactual to the former. In panel regressions on firms' incoming and quitting consumers, we look at the differential response to price changes and identify the lock-in effect of switching costs from the difference between the two. We illustrate our method by analyzing the Hungarian personal loan market and find strong lock-in effects.

April 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 24, 2011

East Asian Market and Competition Policy Conference: April 30, 2011

Posted by D. Daniel Sokol

East Asian Market and Competition Policy Conference


Date: April 30, Saturday, 2011

Venue: Shinhan Hall, 6th Floor, Centennial Building,
Sookmyung Women's University, Seoul, Korea


Organizers:

- Specialization Center of the Institute of Law, Sookmyung Women's University,
Korea

- Panel on the Advancement of Competition Law and Policy supported by the
National Research Foundation of Korea


- Panel on the Competition Cooperation in Northeast Asia supported by
Korea Fair Trade Commission

INVITATION



On behalf of the organizers I am pleased to invite you to the Conference on East Asian Market and Competition Policy to be held in Seoul, Korea, on April 30, 2011. We invited high ranking officials and prominent scholars from Asia, Europe and America as panelists, and will illuminate the role of competition policy and the trends in competition policy enforcement in the context of economic cooperation and regional economic integration in East Asia. We anticipate your participation, and look forward to welcoming you in Seoul.


Sincerely,

Ki Jong Lee
Professor and Director
Specialization Center of the Institute of Law
Sookmyung Women's University

AGENDA


09:45-10:00 Opening Session

Welcoming remark

Eun-Gyun Mok, Dean, Graduate School, Sookmyung Women's University, Korea

Congratulatory remark

Dong-Heub Lee, Justice, Constitutional Court, Korea

10:00-11:10 Session 1

The Role of Competition Policy in Facilitating Regional Economic Integration in East Asia

Moderator

Ji Sang Chang, Professor, Kyungbook National University, Korea


Speaker

Cecilio Madero Villarejo, Deputy Director General, Mergers and Antitrust, European Commission, EU

Discussants

Song Bum Shin, Director, Regional Cooperation Division, Ministry of Foreign Affairs and Trade, Korea

Ki Jong Lee, Professor, Sookmyung Women's University, Korea


11:00-11:20 Break

11:20-12:30 Session 2


Trends in Competition Policy Enforcement

Moderator

Kiljun Park, Professor, Yonsei University, Korea


Speakers

William E. Kovacic, Commissioner, Federal Trade Commission, US

Hackhyun Kim, Commissioner, Fair Trade Commission, Korea

Jiang Lui, Director, Case-Acceptance Division, Anti-Monopoly Bureau, Ministry of Commerce, China


12:30-13:50 Lunch Break


13:50-14:50 Session 3


FTAs and the Cooperation on Competition Policy in East Asia


Moderator

Jinook Jeong, Professor, Yonsei University, Korea


Speaker

Xiaoye Wang, Professor, Chinese Academy of Social Science, China


Discussants

Hiroshi Nakazato, Senior Planning Officer, International Affairs Division, Fair Trade Commission, Japan

Jinyul Ju, Professor, Pusan National University, Korea

14:50-15:00 Closing Session

CONTACT

Ki Jong Lee
Professor and Director
Specialization Center of the Institute of Law
Sookmyung Women's University
52 Hyochangwon-gil, Yongsan
Seoul 140-742, KOREA
T +82-2-2077-7091
F +82-2-2077-7969
Email: waterbel@hanmail.net



April 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Saturday, April 23, 2011

If Antitrust Law Practitioners Were Counted as Full Time Academics, What Would Their Citation Counts Look Like?

Posted by D. Daniel Sokol

I thought it would be interesting to see which antitrust practitioners have the most citations in westlaw. This is a very unscientific search but I tried to think of some of the practitioners whose work I regularly see in print. We have quite a line-up of well cited people that average more citations than most law faculties in the United States -- and these people all have full time day jobs! To compare, you can find the median scholarly citation count for the Top 25 most cited full time law faculties here. The median citation counts at Yale, Harvard and Chicago are 400, 360, and 295 respectively whereas the median citation counts at Emory, Minnesota and University of Virginia are 130, 180, and 150.

Doug Melamed (listed as Douglas) 1,611
David Balto 599
Will Tom (listed as Willard) 364
Bill Kolasky (listed as William) 338
Bill Baer (listed as William) 262
Joe Kattan (listed as Joseph) 236
Tom Rosch (listed as Thomas) 232
Gary Spratling 220
Ilene Gotts 204
Dick Steueer (listed as Richard) 201
Joe Sims 186
Jonathan Jacobson 171
Bert Foer (listed as Albert) 152
Steve Sunshine (listed as Steven) 148
Bill Blumenthal (listed as William) 145
Paul Denis 135
Ken Glazer (listed as Kenneth) 117
Joe Simons (listed as Joseph) 114
Dale Collins 112
Susan Creighton 99

Because I randomly included names, there are many people whom I am sure I have inadvertently left off the list. Please feel free to email me if you have 100 or more citations in the westlaw JLR database and I will add you.

April 23, 2011 | Permalink | Comments (0) | TrackBack (0)

The New Indian Merger Control Regulations: How Does the Balance Tilt?

Posted by D. Daniel Sokol

Vijaya Sampath & Ankita Goel De Mallik (Bharti Enterprises) ask The New Indian Merger Control Regulations: How Does the Balance Tilt?

ABSTRACT:The Utilitarianism concept of the "greater public good" is the underlying basis of many laws in a developing country like India. This "greater good of many" is seen as one side of a fine balance, with profit motive, liberalization, and economic growth as the other side of the coin. The recently notified Indian merger control regulations titled "The Competition Commission of India (Procedure in regard to the transaction of business relating to combination)" ("Draft Regulations") seems to be an attempt to balance these sometimes conflicting principles.

The "greater good" is clearly visible in the very fact that scrutiny of "combinations" (which term is quite widely defined under section 5 of the Competition Act, 2002 ("Act"), and includes mergers, amalgamations, acquisitions, control etc. by the Commission is designed to ensure that there is no "appreciable adverse effect on competition" ("AAEC"). And the proposal of increased application fees ranging from INR 1 million to 4 million required to be submitted with the form for a notice of proposed combination will bring in more revenues to the public exchequer. At the same time, industry's interests seem to be the reason behind the higher thresholds (but with disregard to transaction size), the proposal of pre-merger consultations, and the prescribed period of 210 days within which the Commission is required to give a decision on a case, after which it is deemed approved.

However, an overview of the merger regulations indicates that certain important factors, such as the milestones which Indian industries have lately been achieving through global acquisitions (like Tata's acquisition of Corus or Bharti Airtel's acquisition of Zain's Africa business), were over-looked while drafting the framework within which these merger regulations will work, as the merger regulations seem to be divorced from the practices and precedents within which global transactions (acquisitions or mergers) take place. Without complete details and specifics, below are just a few arguments in support of this proposition that the perspective of Indian industries endeavoring to make global acquisitions needs to be better taken into account.

April 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, April 22, 2011

Dynamic Market for Lemons with Endogenous Quality Choice by the Seller

Posted by D. Daniel Sokol

Keiichi Kawai (Department of Economics, Northwestern University) explores the Dynamic Market for Lemons with Endogenous Quality Choice by the Seller.

ABSTRACT: We analyze a dynamic market for lemons in which the quality of the good is endogenously determined by the seller. Potential buyers sequentially submit offers to one seller. The seller can make an investment that determines the quality of the item at the beginning of the game, which is unobservable to buyers. At the interim stage of the game, the information and payoff structures are the same as in the market for lemons. Our main result is that the possibility of trade does not create any efficiency gain if (i)the common discounting is low, and (ii)the static incentive constraints preclude the mutually agreeable ex-ante contract under which the trade happens with probability one. Our result does not depend on whether the offers by buyers are private or public.

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

Product Market Regulation and Competition in China

Posted by D. Daniel Sokol

Paul Conway, Richard Herd, Thomas Chalaux, Ping He, Jianxun Yu (OECD) discuss Product Market Regulation and Competition in China.

ABSTRACT: The extent of competition in product markets is an important determinant of economic growth in both developed and developing countries. This paper uses the 2008 vintage of the OECD indicators of product market regulation to assess the extent to which China’s regulatory environment is supportive of competition in markets for goods and services. The results indicate that, although competition is increasingly robust across most markets, the overall level of product market regulation is still restrictive in international comparison. These impediments to competition are likely to constrain economic growth as the Chinese economy continues to develop and becomes more sophisticated. The paper goes on to review various aspects of China’s regulatory framework and suggests a number of policy initiatives that would improve the extent to which competitive market forces are able to operate. Breaking the traditional links between s! tate-owned enterprises and government agencies is an ongoing challenge. Reducing administrative burdens, increasing private sector involvement in network sectors and lowering barriers to foreign direct investment in services would also increase competition and enhance productivity growth going forward. Some of the reforms introduced by the Chinese government over the past two years go in this direction and should therefore help foster growth.

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

Up or Down? A Male Economist's Manifesto on the Toilet Seat Etiquette

Posted by D. Daniel Sokol

Jay Pil Choi (Michigan State Economics) has authored some very interesting antitrust economics papers. He recently published outside of the antitrust area but on a topic that may interest readers nonetheless - Up or Down? A Male Economist's Manifesto on the Toilet Seat Etiquette.

ABSTRACT: This paper develops an economic analysis of the toilet seat etiquette. I investigate whether there is any efficiency justification for the presumption that men should leave the toilet seat down after use. I find that the down rule is inefficient unless there is a large asymmetry in the inconvenience costs of shifting the position of the toilet seat across genders. I show that the selfish or the status quo rule that leaves the toilet seat in the position used dominates the down rule in a wide range of parameter spaces including the case where the inconvenience costs are the same.

 

In the Sokol household, this debate is superfluous. In a family of three females and one male, the rule is toilet seat down -- or else.

April 22, 2011 | Permalink | Comments (1) | TrackBack (0)

Targeted advertising with consumer search: an economic analysis of keywords advertising

Posted by D. Daniel Sokol

Alexandre De Cornière (PSE - Paris-Jourdan Sciences Economiques) analyzes Targeted advertising with consumer search: an economic analysis of keywords advertising.

ABSTRACT: This article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate.

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

Thursday, April 21, 2011

Lunchtime Seminar on the Role of Vertical Competition in Consumer Goods Industries

Posted by D. Daniel Sokol

Forthcoming event at the Oxford Centre for Competition Law and Policy:

The Role of Vertical Competition in Consumer Goods Industries

Thursday 2 June 2011 12h00

bullet Venue: Centre for Competition Law & Policy

Organised by Centre for Competition Law & Policy

In antitrust law and economics, especially in the United States, competition is considered to be an exclusively horizontal process. Firms compete only with rival firms at the same stage. But industry participants will testify that they have a competitive as well as a complementary relationship with firms from whom they buy and to whom they sell. The bargaining between firms at successive stages is the vertical form of competition. Recognizing this reality enables a superior analytical framework in which both forms of competition are present and leads to some fresh insights.

Consider a 3 stage consumer goods industry with suppliers, goods manufacturers, and retailers who resell to household consumers. In upstream vertical competition a manufacturer strives to drive down the margins of his suppliers to obtain a lower invoice cost. In downstream vertical competition the manufacturer strives to drive down his retailers’ margins to obtain a larger share of his brand’s consumer price at the latter’s expense. The manufacturer that is the most successful vertical competitor in the product category will buy cheaper and sell dearer than rival makers, thereby erecting mobility and entry barriers and gaining more market power than is indicated by his horizontal market share and HHI. Becoming a stronger vertical competitor increases a firm’s standing as a horizontal competitor and vice versa.

The discussion will explore these themes of vertical competition, from an economic and legal view point.

There is no charge to attend. Please email Ms Jenny Dix, CCLP administrator, to ensure availability of places.

Programme:

12h00 Refreshments

12h20 Introduction

Ariel Ezrachi, Oxford Centre for Competition Law and Policy

12h20 Vertical Competition

Robert L. Steiner, Independent Economist, and Senior Fellow American Antitrust Institute

13h00 A Legal Commentary

Ioannis Lianos, University College London

13h20 An Economic Commentary

Howard Smith, Department of Economics, The University of Oxford

13h40 Discussion

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

Joint IBA and KBA Competition Law Conference 28 - 29 April 2011 Seoul, South Korea

Posted by D. Daniel Sokol

Joint IBA and KBA Competition Law Conference 28 - 29 April 2011 Seoul, South Korea

A conference co-presented by the International Bar Association’s (IBA) Antitrust Committee and the Korean Bar Association (KBA) and supported by the IBA Asia Pacific Regional Forum.  See the program here.

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

Winning by Losing – Evidence on Overbidding in Mergers

Posted by D. Daniel Sokol

Ulrike Malmendier, University of California, Berkeley - Department of Economics, Enrico Moretti, University of California, Berkeley - Department of Economics, and Florian S. Peters, University of Amsterdam have an interesting new paper on Winning by Losing – Evidence on Overbidding in Mergers.

ABSTRACT: I examine the determinants, length, and effects of supplier-customer contracts using unique data on a customer’s contractual purchase obligations with its suppliers. Consistent with theory, I find evidence that supplier relationship-specific investments, the supplier’s relative bargaining power, production complexity, and vertical integration costs are positively related to the propensity for suppliers and customers to contract. I also find evidence that the propensity for suppliers and customers to contract is negatively related to alternative sources of information about the customer, contracting costs, and the percentage of a customer’s input traded on financial markets. Contract length is positively related to relationship-specific investments and supplier bargaining power. Additionally, customer firms which have product market contracts with their suppliers have better relative performance as measured by operating performance and firm value. These performance results are robust to corrections for endogeneity. Finally, I examine the choice between vertical integration versus supplier-customer contracts, and find that the choice is predicted by the type of relationship-specific investments. Consistent with theory, I find that relationship-specific investments defined using tangible assets are positively related to vertical integration and relationship-specific investments defined using R&D intensity are positively related to contracts. My results suggest that market frictions play an important role in shaping supplier-customer contracting activity and firm boundaries.

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

Vertical integration and exclusive vertical restraints between insurers and hospitals

Posted by D. Daniel Sokol

Vertical integration and exclusive vertical restraints between insurers and hospitals Rudy Douven, Rein Halbersma, Katalin Katona and Victoria Shestalova (CPB Netherlands Bureau for Economic Policy Analysis) have researched Vertical integration and exclusive vertical restraints between insurers and hospitals.

ABSTRACT: We examine vertical integration and exclusive vertical restraints in health-care markets where insurers and hospitals bilaterally bargain over contracts. We employ a bargaining model in a concentrated health-care market of two hospitals and two health insurers competing on premiums. Without vertical integration, some bilateral contracts will not be concluded only if hospitals are sufficiently differentiated, whereas with vertical integration we find that a breakdown of a contract will always occur. There may be two reasons for not concluding a contract. First, hospitals may choose to soften competition by contracting only one insurer in the market. Second, insurers and hospitals may choose to increase product differentiation by contracting asymmetric hospital networks. Both types raise total industry profits and lower consumer welfare.

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

Tim Wu and Others at the FTC Gunning for Action Against Large Internet Firms

Posted by D. Daniel Sokol

See the Bloomberg story here titled FTC's Wu Says Dominant Internet Firms Shouldn’t Have Multiple Monopolies.

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

Price-Cost Margins and Shares of Fixed Factors

Posted by D. Daniel Sokol

Jozef Konings, Katholieke Universiteit Leuven and CEPR, Werner Roeger, European Commission, and Liqiu Zhao, Katholieke Universiteit Leuven explore Price-Cost Margins and Shares of Fixed Factors.

ABSTRACT: Reduced form approaches to estimate markups typically exploit variation in observed input and output. However, these approaches ignore the presence of fixed input factors, which may result in an overestimation of the price-cost margins. We first propose a new methodology to simultaneously estimate price-cost margins and the shares of fixed inputs. We then use Belgian firm level data for manufacturing and service sectors to show that markups are lower when taking into account fixed input factors. We find that the average price-cost margin of manufacturing firms is 0.041, compared to 0.090 when we do not control for fixed costs of production. We also show that price-cost margins increase with the share of fixed costs in turnover. Our findings provide new insights about observed high price-cost margins in service industries. In particular, we show that once fixed costs are taken into account, price-cost margins in service industries are comparable to those in manufacturing.

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

Chile's Competition Agency, the FNE Has Published New Guidelines on Public Procurement and Antitrust

Posted by D. Daniel Sokol

The FNE (Chile) has published new guidelines on Public Procurement and Antitrust.  I believe that these are the first such guidelines in Latin America.  This is an important development by what is an excellent competition authority.

Update: Both El Salvador and Colombia have existing guidance/awareness materials/manuals – whatever you want to call it – on public procurement. 

Check the world’s largest collection of cartel awareness and outreach materials (still growing) on the ICN website, including public procurement.

April 21, 2011 | Permalink | Comments (1) | TrackBack (0)

Competitive Pressure and the Adoption of Complementary Innovations

Posted by D. Daniel Sokol

Tobias Kretschmer (Ludwig-Maximilians-Universitat-Munchen, Institute for Strategy, Technology and Organization), Eugenio Miravete (University of Texas) and José Pernías (Universidad Jaume I de Castellon) have posted Competitive Pressure and the Adoption of Complementary Innovations.

ABSTRACT: Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial increase in competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories. Using French data we evaluate the existence of complementarities between the adoption of software applications and the scale of production. Firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production. Results are robust to the existence of unobserved heterogeneity.

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