Wednesday, December 26, 2012

Competition and Price Discrimination in the Parking Garage Industry

Posted by D. Daniel Sokol

Haizhen Lin (Department of Business Economics and Public Policy, Indiana University Kelley School of Business) and Yijia Wang (NERA Economic Consulting) analyze Competition and Price Discrimination in the Parking Garage Industry.

ABSTRACT: We study the relationship between competition and price discrimination through an empirical examination of hourly price schedules in the parking garage industry. We find that the degree of price schedule curvature decreases with competition, implying a greater proportionate drop in low-end prices than in high-end prices when competition intensifies. We provide an explanation for our findings using differences in search behaviors between short- and long-term customers.

December 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Hospital Quality Competition Under Fixed Prices

Posted by D. Daniel Sokol

Hugh Gravelle (Centre for Health Economics, University of York, UK), Rita Santos (Centre for Health Economics, University of York, UK), Luigi Siciliani (Centre for Health Economics and Department of Economics & Related Studies, University of York, UK) and Rosalind Goudie (School of Social & Community Medicine, University of Bristol, UK) explore Hospital Quality Competition Under Fixed Prices.

ABSTRACT: The relationship between the quality of health care and the extent of competition amongst providers has been the subject of intense policy interest and debate. As part of the ESHCRU programme we are undertaking a set of related investigations into this relationship in the hospital sector, in primary care (general practices) and in social care.

December 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Interview with Howard Shelanski, Director, FTC Bureau of Economics

Posted by D. Daniel Sokol

The current Antitrust Source has an Interview with Howard Shelanski, Director, FTC Bureau of Economics.

December 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Estimating consumer lock-in effects from firm-level data

Posted by D. Daniel Sokol

Gabor Kezdi (Central European University, IEHAS) and Gergely Csorba (Institute of Economics, IEHAS) are Estimating consumer lock-in effects from firm-level data.

ABSTRACT: This paper proposes a practical method for estimating consumer lock-in effects from firm-level data. The method compares the behavior of already contracted consumers to the behavior of new consumers, the latter serving as a counterfactual 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 from the difference between the two. We discuss the potential econometric issues and measurement problems and offer solutions to them. We illustrate our method by analyzing the market for personal loans in Hungary and find strong lock-in effects.

December 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 25, 2012

Entry Regulation Asymmetries and Gasoline Competition in a Mixed Motorway Network

Posted by D. Daniel Sokol

Daniel Albalate (Faculty of Economics, University of Barcelona) and Jordi Perdiguero (Faculty of Economics, University of Barcelona) discuss Entry Regulation Asymmetries and Gasoline Competition in a Mixed Motorway Network.

ABSTRACT: Regulatory and funding asymmetries in the Spanish motorway network produce huge differences in the structure of gasoline markets by motorway type: free or toll. While competition is encouraged among gas stations on free motorways, the regulations for toll motorways allow private concessionaires to auction all gas stations to the same provider, thereby limiting competition and consolidating market power. This paper reports how this regulatory asymmetry results in higher prices and fewer gas stations. Specifically, we show that competition is constrained on toll motorways by the granting of geographical monopolies, resulting in a small number of rivals operating in close proximity to each other, and allowing gas stations to operate as local monopolies. The lack of competition would seem to account for the price differential between toll and free motorways. According to available evidence, deregulation measures affecting to! ll motorway concessions could help to mitigate price inefficiencies and increase consumer welfare.

December 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Monday, December 24, 2012

An Empirical Investigation of the Determinants of Asymmetric Pricing

Posted by D. Daniel Sokol

Marc Remer (Economic Analysis Group, Antitrust Division, U.S. Department of Justice) An Empirical Investigation of the Determinants of Asymmetric Pricing.

ABSTRACT: This article empirically investigates the cause of asymmetric pricing: retail prices responding faster to cost increases than decreases. Using daily price data for over 11,000 retail gasoline stations, I nd that prices fall more slowly than they rise as a consequence of rms extracting informational rents from consumers with positive search costs. Premium gasoline prices are shown to fall more slowly than regular fuel prices but rise at the same pace, and this pricing pattern supports theories based upon competition with consumer search. Further testing also rejects focal price collusion as an important determinant of asymmetric pricing.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Advantaged Bidders in Franchise Auctions

Posted by D. Daniel Sokol

Vincent van den Berg (VU University Amsterdam) Advantaged Bidders in Franchise Auctions.

ABSTRACT: Consider a government that auctions a franchise for, e.g., an airport, telecommunication network, or utility. Consider an 'incumbent bidder' that owns a complement or substitute. With an auction on the transfer (i.e. payment) to the government, the incumbent is advantaged.If the government regulates the market with an auction on the price asked to consumers, it depends who is advantaged. With complements, the incumbent is advantaged: it can set a lower price on the new franchise, as this increases the profit of the other. With substitutes, the incumbent is disadvantaged. In many settings, the advantage bidder always wins.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Alan Meese on Bork

Posted by D. Daniel Sokol

Alan Meese (William & Mary) has a very thoughful post on Bork and antitrust. Alan just shared it with me so apologies that I just posted it now.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Strategic Bypass Deterrence

Posted by D. Daniel Sokol

Francis Bloch (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X) and Axel Gautier (HEC-University of Liege - Department of Economics analyze Strategic Bypass Deterrence.

ASBTRACT: In liberalized network industries, entrants can either compete for service using the existing infrastructure (access) or deploy their own infrastructure capacity (bypass). In this paper, we demonstrate that, under the threat of bypass, the access price set by an unregulated and vertically integrated incumbent is compatible with productive efficiency. This means that the entrant bypasses the existing infrastructure only if it can produces the network input more efficiently. We show that the incumbent lowers the access price compared to the ex-post efficient level to strategically deter ineffi cient bypass by the entrant. Accordingly, from a productive effi ciency point of view, there is no need to regulate access prices when the entrant has the option to bypass. Despite that, we show that restricting the possibilities of access might be profi table for consumers and welfare because competition is fiercer under bypass.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Capacity Choice under Uncertainty with Product Differentiation

Posted by D. Daniel Sokol

Christiaan Behrens (VU University Amsterdam) Mark Lijesen (VU University Amsterdam) discuss Capacity Choice under Uncertainty with Product Differentiation.

ABSTRACT: This article analyses the capacity-then-price game for a duopoly market. We add to the literature by explicitly taking product differentiation into account. We study the impact of capacity costs, demand uncertainty, and vertical and horizontal product differentiation on equilibrium capacities, efficiency, and price dispersion. We identify a minimum degree of vertical product differentiation, relative to horizontal product differentiation, for which the subgame perfect Nash equilibrium in pure strategies is guaranteed to exist. We find that if firms' quality differences exactly offset cost differences, asymmetric outcomes in the capacity stage arise, with the low-cost, low-quality firm providing more capacity than its competitor. We show that the highest level of efficiency is reached at the degree of vertical product differentiation where it would be optimal for welfare if firms had equal capacities. Furthermore, our mod! el provides an explanation for ambiguous results in empirical research on price dispersion.

December 24, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, December 21, 2012

100 Years of Standard Oil Antitrust Symposium

Posted by D. Daniel Sokol

The Southern California Law review has put up on its website the great symposium 100 Years of Standard Oil Antitrust Symposium.

Volume 85 March 2012 Number 3

 

100 Years of Standard Oil Antitrust Symposium

 

429-450

Antitrust Energy

Barak Orbach & D. Daniel Sokol

 

451-458

Antitrust and Business History

Margaret C. Levenstein

 

459-498

The "Hub-and-Spoke" Conspiracy that Created the Standard Oil Monopoly

Benjamin Klein

 

499-558

Rethinking the Economic Basis of the Standard Oil Refining Monopoly: Dominance Against Competing Cartels

George L. Priest

 

559-572

Were Standard Oil's Rebates and Drawbacks Cost Justified?

Daniel A. Crane

 

573-604

Revisiting the Revisionist History of Standard Oil

Christopher R. Leslie

 

605-656

The Antitrust Curse of Bigness

Barak Orbach & Grace Campbell Rebling

 

657-688

Standard Oil and U.S. Steel: Predation and Collusion in the Law of Monopolization and Mergers

William H. Page

 

689-732

The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy

D. Daniel Sokol

 

733-782

Moving Beyond Caricature and Characterization: The Modern Rule of Reason in Practice

Andrew I. Gavil

 

783-814

Standard Oil as Lochner's Trojan Horse

Alan J. Meese

 

815-842

Remedies for Monopolization from Standard Oil to Microsoft and Intel: The Changing Nature of Monopoly Law from Elimination of Market Power to Regulation of Its Use

Peter C. Carstensen

 

843-916

The Long Shadow of Standard Oil: Policy, Petroleum, and Politics at the Federal Trade Commission

Timothy J. Muris & Bilal K. Sayyed

 

Responses

Michael Reksulak & William F. Shughart II, Tarring the Trust: The Political Economy of Standard Oil, 85 S. Cal. L. Rev. Postscript 23 (2012).

Maurice E. Stucke, Occupy Wall Street and Antitrust, 85 S. Cal. L. Rev. Postscript 33 (2012).

Abraham L. Wickelgren, Determining the Optimal Antitrust Standard: How to Think About Per Se Versus Rule of Reason, 85 S. Cal. L. Rev. Postscript 52 (2012).

Joshua D. Wright, What Would Predatory Pricing Be Without John McGee? A Reply to Professor Leslie, 85 S. Cal. L. Rev. Postscript 60 (2012).

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

New York Bar Foundation is accepting grant applications for the 2013 Antitrust Section Law Student Fellowship

Posted by D. Daniel Sokol

THE NEW YORK BAR FOUNDATION

 2013 ANTITRUST SECTION

Law Student fellowship

 

The New York Bar Foundation is pleased to announce the 2013 Antitrust Section Law Student Fellowship, which has been established by the Foundation through gifts from the Antitrust Section of the New York State Bar Association.  The Fellowship will be awarded to a current first or second year law student to work on antitrust and related matters in the public sector in the State of New York during the Summer of 2013.

Fellowship Program Goals

 

Provide law students an opportunity to experience antitrust practice during the summer after their first year of law school and to increase the representation of lawyers from a diverse range of backgrounds in the practice of antitrust law in New York.  The ultimate goal of the Fellowship is to forge relationships among antitrust practitioners throughout the State of New York and foster greater diversity in the antitrust bar.  Through the Fellowship, a student will be provided a meaningful and appropriately supervised work experience in the New York Office of New York Attorney General, Antitrust Bureau; the Federal Trade Commission, Northeast Region; or the Department of Justice Antitrust Division, New York Field Office.

 

The Fellowship

 

  1. The Fellowship, valued at $6,000, will be awarded to one (1) student to spend the summer of 2013 (10 weeks) working on antitrust matters in the New York Office of New York Attorney General, Antitrust Bureau; Federal Trade Commission, Northeast Region; or Department of Justice Antitrust Division, New York Field Office.
  2. The Fellow will be a guest member of the NYSBA Antitrust Section for two years starting with the award of the Fellowship.
  3. The Fellow will be invited to attend Executive Committee meetings of the NYSBA Antitrust Section during the Summer and Fall of 2013.
  4. The Fellowship recipient will be announced no later than March 15, 2013.

Eligibility

 

The Fellowship is open to all first-year (1L) and second-year (2L) students (as of the Fall 2012 semester) who are capable of fulfilling the requested work hours and responsibilities and meet the criteria under the heading “Judging” below.

Fellowship Length

 

The Fellowship will take place during the summer of 2013 for a period of 10 weeks, approximately from June 3 to August 9, 2013. The expected work requirement per week generally will be 35 to 40 hours.

Location of Fellowship

 

The 2013 Fellowship will take place in the New York Office of New York Attorney General, Antitrust Bureau; Federal Trade Commission, Northeast Region; or  Department of Justice Antitrust Division, New York Field Office. Fellowship finalists will be interviewed in New York City.

Payment of Fellowship

 

The student will receive $3,000 at the start of the Fellowship with the remaining $3,000 paid to the student at the end of the Fellowship (no federal or state income taxes will be withheld and a 1099 will be issued to the student by January 31, 2014).

Housing and Other Expenses

 

Housing, transportation and all other expenses to participate in the Fellowship will be provided by the student.

Fellowship Application Requirements

 

     The applicant must submit the following:

 

  1. A completed application (application form below)
  2. Cover letter of interest
  3. Unofficial undergraduate school transcript
  4. Resume
  5. Two letters of recommendation
  6. One writing sample on any topic related to the law.  The writing sample must be at least five pages but shall not exceed 10 typed pages double-spaced.

 

Deadline

 

All hard copy materials must be submitted by mail with a postmark on or

before Friday, February 1, 2013.

 

Judging

 

A Fellowship Committee will undertake a careful review of all applications for the Fellowship, and will consider the criteria below in evaluating each candidate.   No single criterion or combination of criteria will be dispositive. 

 

  1. Content and quality of application materials.
  2. Demonstrated interest in antitrust and/or consumer protection.
  3. New York permanent residence or demonstrated intent to reside and practice law in New York following graduation from law school.
  4. Diverse background (e.g., Asian/Pacific Islander, Black/African American, Latino/a, LGBT, Native American/Alaska Native, Physically Disabled.)
  5. Work experience.
  6. Academic record.
  7. Leadership experience.
  8. Extracurricular activities and community service.
  9. Quality of written expression.
  10. Maturity, integrity and professionalism.
  11. Any other relevant factors.

 

Submission

 

All materials must be submitted by mail with a postmark on or before Friday, February 1, 2013.

Mail to:

ANTITRUST FELLOWSHIP

THE NEW YORK BAR FOUNDATION

ONE ELK STREET

ALBANY, NY 12207


Download NY bar

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

Toward an Economic Approach to Agency Agreements

Posted by D. Daniel Sokol

Angela Huyue Zhang (Herbert Smith) has posted Toward an Economic Approach to Agency Agreements.

ABSTRACT: It is a long-standing antitrust principle that agency relationships are exempt from price fixing violations. But the agency relationship must be "genuine." To discern genuine agency agreements, the prevailing approach adopted in both the United States and the EU focuses on the amount of risk incurred by the agent in relation to the distribution of the manufacturer's goods. Yet this approach has tended to obscure the economic nature of agency relationship. The real question to ask is not whether the agent has incurred any risk, but instead whether in a given case an agency model, rather than a distribution model, actually constitutes a more efficient form for organizing distribution functions between the contracting parties. In fact, over a quarter of a century ago, Judge Posner proposed a business justification approach for analyzing agency agreements in Morrison v. Murray Biscuit. Building on Morrison and on economic literature of property rights and agency problems, this article argues for an economic approach to discern genuine agency agreements. It also considers the unintended consequences that could result from legal constraints and, in particular, the implications for recent antitrust investigations into the e-book and online travel agency industries.

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

FTC Right to Close Google Investigation

Posted by D. Daniel Sokol

David Balto argues that the FTC Right to Close Google Investigation.

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

Buyer power in a regulatory context: myth or reality?

Posted by D. Daniel Sokol

Oxera asks Buyer power in a regulatory context: myth or reality? ABSTRACT: A report by Oxera for the Netherlands Competition Authority (NMa) illustrates that buyer power is an often misunderstood area in both theory and practice. Regulators wishing to adopt a more ‘light-touch’ approach to network regulation should take note.

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition before Sunset: The Case of the Finnish ATM Market

Posted by D. Daniel Sokol

Maria Kopsakangas-Savolainen, Finnish Environment Institute, University of Oulu - Department of Economics and Tuomas Takalo, Bank of Finland, Monetary Policy and Research Department have written on Competition before Sunset: The Case of the Finnish ATM Market.

ABSTRACT: We build a simple model to study service fee competition between an incumbent and an independent ATM deployer, and its optimal regulation. We use the model to analyze an actual regulation of such a market by competition authorities in Finland. We find that socially optimal first-best fees would imply negative profits for the independent deployer, calling for a Ramsey regulation. While the Finnish regulation pushes the foreign fee downwards towards its socially optimal level, the regulated fees are likely to remain too high from the welfare point of view. In contrast with the actual regulation, it would be essential to regulate the independent deployer's interchange fee, as the incumbent deployer internalizes the effect of its foreign fee on consumer usage of the rival's network and has little incentive for foreclosure.

December 21, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 20, 2012

Closing the Back Door Route to Cartels: The Need to Clarify the Regulated Conduct Doctrine

Posted by D. Daniel Sokol

The CD Howe Institute has released a study Closing the Back Door Route to Cartels: The Need to Clarify the Regulated Conduct Doctrine.

ABSTRACT: The Competition Bureau should actively engage in competition matters in regulated sectors of the economy, where anti-competitive conduct may be protected by government legislation or authority. This is the consensus view of the C.D. Howe Institute’s Competition Policy Council, which held its fourth meeting on November 8, 2012.

Members of the Council held that the Bureau should more clearly delineate the scope of anti-competitive practices that it sees as protected by provincial or federal legislation or delegated authority; and it should be directly engaged in regulatory decisions that potentially impair competition. As well, the Bureau should contribute independent analysis in merger reviews in regulated sectors.

December 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Standing on the Shoulders of Babies: Dominant Firms and Incentives to Innovate

Posted by D. Daniel Sokol

Luis M. B. Cabral, New York University (NYU) - Leonard N. Stern School of Business - Department of Economics, and Ben Polak, explore Standing on the Shoulders of Babies: Dominant Firms and Incentives to Innovate.

ABSTRACT: Critics of Microsoft and Google's dominance claim these companies are nothing but "giants standing on the shoulders of babies,"whose dominance destroys the incentives for entrants to innovate. By contrast, pro-Microsoft and pro-Google analysts stress the benefits of large, innovative firms. We analyze the validity of these competing claims in a model of R&D and product market competition between a dominant firm and a small rival. An increase in firm dominance, which we measure by a premium in consumer valuation, increases the dominant firm's incentives but decreases the rival firm's incentives for R&D. We provide sufficient conditions such that the positive effect on the dominant firm is mostly infra-marginal, whereas the negative effect on the rival firm is mostly marginal. As a result, the R&D encouragement effect is lower than the R&D discouragement effect; and if innovation is sufficiently important then firm dominance also decreases consumer and social surplus. We also provide conditions such that an increase in firm dominance increases the probability of innovation, essentially because the transfer of innovation incentives form the rival firm to the dominant firm reduces the probability of duplicative R&D efforts.

December 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Barak Orbach on Robert Bork

Posted by D. Daniel Sokol

The Washington Post has a nice Q&A on Robert Bork with Barak Orbach (Arizona).

December 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Is the Effect of Competition on Price Dispersion Non-Monotonic? Evidence from the U.S. Airline Industry

Posted by D. Daniel Sokol

Mian Dai, Drexel University Qihong Liu, University of Oklahoma - Department of Economics and Konstantinos Serfes, Drexel University - Department of Economics & International Business ask Is the Effect of Competition on Price Dispersion Non-Monotonic? Evidence from the U.S. Airline Industry.

ABSTRACT: We investigate the effect of competition on price dispersion in the airline industry. Using panel data from 1993 to 2008, we find a non-monotonic effect of competition on price dispersion. An increase in competition is associated with greater price dispersion in concentrated markets but is associated with less price dispersion in competitive markets (i.e. an inverse-U relationship). Our empirical findings are consistent with an oligopolistic second-degree price discrimination model and encompass contradictory findings in the literature.

December 20, 2012 | Permalink | Comments (0) | TrackBack (0)