Tuesday, February 24, 2015
David Balto has an op-ed on The FTC should release an interim report to help patent reform.
Gautam Gowrisankaran (Arizona), Aviv Nevo (Northwestern) and Robert Town (Wharton) have a great paper on Mergers When Prices Are Negotiated: Evidence from the Hospital Industry.
ABSTRACT: We estimate a bargaining model of competition between hospitals and managed care organizations (MCOs) and use the estimates to evaluate the effects of hospital mergers. We find that MCO bargaining restrains hospital prices significantly. The model demonstrates the potential impact of coinsurance rates, which allow MCOs to partly steer patients toward cheaper hospitals. We show that increasing patient coinsurance tenfold would reduce prices by 16 percent. We find that a proposed hospital acquisition in Northern Virginia that was challenged by the Federal Trade Commission would have significantly raised hospital prices. Remedies based on separate bargaining do not alleviate the price increases.
Yuriy Gorodnichenko, UC Berkeley & NBER, Viacheslav Sheremirov, FRB Boston and Oleksandr Talavera, Sheffield ask Price Setting in Online Markets: Does IT Click?
ABSTRACT: Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, we shed new light on how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. We document that although online prices are more flexible than offline prices, they continue to exhibit relatively long spells of fixed prices, large size and low synchronization of price changes, considerable cross-sectional dispersion, and low sensitivity to predictable or unanticipated changes in demand conditions. Qualitatively these patterns are similar to those observed for offline prices, which calls for more research on the sources of price rigidities and dispersion.
Monday, February 23, 2015
Pierre Larouche, Tilburg Law and Economics Center (TILEC); College of Europe - Bruges; Tilburg University - Tilburg Law School; Center on Regulation in Europe (CERRE), and Geertrui Van Overwalle, Leuven University have a new thought paper on Interoperability Standards, Patents and Competition Policy.
ABSTRACT: While the traditional literature and the policy statements concerning standardization as such emphasize the benefits of standardization, the intellectual property and competition law literature and policymaking has been more critical of standardization. Intellectual property is relevant, as the technology embedded in a standard is often protected with so-called Standard Essential Patents (SEPs). Similarly, competition law is relevant to the collective behaviour of private firms in creating and operating Standard-Setting Organisations (SSOs), and to their individual behaviour in notifying and licensing their intellectual property. In recent litigation, three issues have risen to the fore, popularized under the labels “patent ambush”, “patent holdup” and “patent thickets”. There is a risk that the discussion of standardization, in academic and policy circles, becomes reduced to these issues. The paper advocates a more holistic approach, and sets out avenues for future research, including an investigation of the consequences of a broader and more nuanced view of the various parameters of standardization, an analysis of the relationship between standards and innovation, and a review of the interplay between the private and public aspects of standardization.
Karim Jamal, University of Alberta - Department of Accounting, Operations & Information Systems and Shyam Sunder, Yale University - School of Management explore Monopoly Versus Competition in Setting Accounting Standards.
ABSTRACT: Financial accounting standards are set by organizations granted a significant degree of monopoly power by various governments. While there has been considerable debate on the merits of national (e.g., US Financial Accounting Standards Board (FASB)) versus international (International Accounting Standards Board (IASB)) monopolies, little attention has been paid to the merits of using competing standard‐setting organizations (SSOs) for setting accounting standards. We compare the standard‐setting processes of the FASB/IASB to the processes of four technology‐oriented SSOs to assess the role of competition. We also provide a case study of monopoly and competitive standards in telephony. Both telephony and accounting yield some gains from coordination, and similar arguments are used (under the labels of comparability and consistency of accounting) in debates about granting a monopoly to their respective SSOs. Our results show that a group of volunteers competing with the government‐sanctioned monopoly of International Telecommunications Union transformed the telephone industry. Thanks to this standards competition, we enjoy free video internet calling and massive cost savings. Implications for accounting standard setting are discussed.
Nathaniel Grow University of Georgia - Department of Insurance, Legal Studies, Real Estate describes Regulating Professional Sports Leagues.
ABSTRACT: Four monopoly sports leagues currently dominate the U.S. professional sports industry. Although federal antitrust law — the primary source of regulation governing the industry — would normally be expected to provide a significant check on anticompetitive, monopolistic behavior, it has failed to effectively govern the leagues due to both their well-entrenched monopoly status and the unique level of coordination necessary among their respective teams. Consequently, the four leagues today each in many respects enjoy unregulated monopoly status in what is estimated to be a $67 billion industry.
As one might expect, these leagues use their largely unchecked monopoly power to injure the public in various ways. By restricting expansion, leagues create an artificial shortage of franchises enabling their existing teams to extract billions of dollars in stadium subsidies from U.S. taxpayers. Similarly, by preventing their franchises from individually licensing their broadcast rights nationally or over the Internet, the leagues are able to demand significantly higher fees from television networks and consumers than would be obtainable in a competitive marketplace, while at the same time subjecting viewers to arcane and outdated blackout provisions.
Unfortunately, existing proposals in the academic literature to remedy this undesirable state of affairs are both impractical and unlikely to be effective. This article instead proposes a surprisingly overlooked solution: the creation of a federal sports regulatory agency. Because the U.S. professional sports leagues today effectively operate as natural monopolies — with nearly 150 years of history establishing that competing leagues cannot sustainably co-exist in a sport for any significant length of time — direct government regulation of the industry is warranted. Indeed, a specialized agency would be particularly well suited to ensure that the leagues’ activities are aligned with the public interest, while at the same time accommodating the industry’s unusual economic characteristics.
Maarten Pieter Schinkel, University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA), Lukas Toth, University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) and Jan Tuinstra, University of Amsterdam - Department of Quantitative Economics (KE); Tinbergen Institute have a fascinating paper on Discretionary Authority and Prioritizing in Government Agencies.
ABSTRACT: Government agencies typically have a certain freedom to choose among different possible courses of action. This paper studies agency decision-making on priorities in a principal-agent framework with multi-tasking. The agency head (the principal) has discretion over part of the agency's budget to incentivize his staff (agents) in the pick-up of cases. The head is concerned with society's benefits from the agency's overall performance, but also with the organization's public image as formed from pursuing high-profile cases and various non-case specific activities. Based on their talent and the contracts offered by the head, staff officials choose which type of task to pursue: complex major, yet difficult to complete cases with an uncertain outcome, or basic minor and simple cases with a high probability of success. The size of the agency's discretionary budget influences not only the scale, but also the type of tasks it will engage in. Social welfare is non-monotonic and discontinuous in the agency's budget. Small changes in the budget may cause extensive restructuring from major to minor tasks, or vice versa. A budget cut can increase welfare more than too little extra budget would. For lower binding budgets, the head continues to sub-optimally incentivize work on complex tasks, when the agency should have shifted down to simpler tasks. In determining the discretionary space of the agency head, the budget-setter can limit the extraction of resources, but thereby also reduces the benefits from the head's superior information on how to incentivize the officials. Antitrust authorities serve as one illustration of policy implications for institutional design, including optimal budgeting and agency mergers.
Sunday, February 22, 2015
Regulation, Antitrust and Promotion of Innovation? Challenges and experiences from communications to payment systems
Friday, February 20, 2015
The Parent-Subsidiary Relationship in EU Antitrust Law and the AEG Telefunken Presumption: Between the Effectiveness of Competition Law and the Protection of Fundamental Rights
Lorenzo Federico Pace, Università degli Studi del Molise - Facolta di Economia discusses The Parent-Subsidiary Relationship in EU Antitrust Law and the AEG Telefunken Presumption: Between the Effectiveness of Competition Law and the Protection of Fundamental Rights.
ABSTRACT: This paper discusses how the protection of fundamental rights has become an issue in European Antitrust Law especially with reference to the parent-subsidiary relationship and the so-called AEG Telefunken presumption.
Cedric Argenton, Tilburg Law and Economics Center (TILEC); Tilburg University - Center and Faculty of Economics and Business Administration and Eric Van Damme, TILEC and CentER, Tilburg University have an interesting paper on Optimal Deterrence of Illegal Behavior Under Imperfect Corporate Governance.
ABSTRACT: We study the optimal design of liability schemes (at the corporate or individual level) when the objective is to deter socially harmful corporate behavior without discouraging productivity enhancements. We assume that firms face agency problems between shareholders and managers (moral hazard) and that unlimited sanctions on individuals are not available. We show that pure corporate liability rules can induce the first-best outcome only if firms can condition compensation on detection and the enforcement system is good enough. In other circumstances, unless individual sanctions can be very high, optimal mechanisms typically impose both corporate and individual liability.
Markus Rohrig, Hengeler Mueller asks Nowhere to Hide? Extradition in Antitrust Cases from a European Perspective.
ABSTRACT: Earlier this year, Germany surrendered Romano Pisciotti, an Italian citizen charged with price fixing and bid rigging in the marine hose cartel, to the US Government. This is the first time the USA secured the extradition of a foreign individual on antitrust charges. This article explores the implications of the Pisciotti case on antitrust practitioners counselling clients in international cartel cases. It also highlights important implications for antitrust policy makers in Europe, especially, when considering the introduction of criminal sanctions—a hotly contested battleground in antitrust policy making today.
Thursday, February 19, 2015
Richard Eccles, Bird & Bird LLP offers Postal Services: Survey of Competition Law Developments (2014).
ABSTRACT: The European Commission has published a detailed summary of its prohibition of the intended merger of United Parcel Service Inc. and TNT Express, based on the finding that the acquisition would significantly impede effective competition in various national markets in the EEA for international intra-EEA express delivery services for small packages. The Court of Justice of the EU has issued a judgment rejecting France's appeal against the European General Court's judgment upholding the European Commission's decision finding that French law involved an unlimited State guarantee of the operations of LaPoste. Important competition law investigations are being conducted by the national competition authority in France and Germany and by the national regulatory authority in the UK, and further important competition regulatory investigations are under way in Germany, in the postal services sector.
Back to the top and updated: New World Bank/OECD Research Project - call for Papers: Promoting Effective Competition Policies for Shared Prosperity and Inclusive Growth February February 18-March 25, 2015
Call for Papers: Promoting Effective Competition Policies for Shared Prosperity and Inclusive Growth
February 18-March 25, 2015
- Deadline for abstracts: March 25, 2015
- Abstract length: 500 words maximum
- Abstracts selected by: April 1, 2015
- Deadline for Completed Papers: April 24, 2015
- Final papers selected by: May 22, 2015
- CONTACT:Martha Martinez Licetti email@example.com
ABOUT THE SUBMISSIONS
The ability of firms to contest and freely compete in product markets is acknowledged to be an important factor in the effective functioning of markets. Existing evidence suggests that a lack of competition in the market limits access to the benefits of growth for poor and vulnerable groups. However, the literature in this area remains in its infancy and there are a number of topics deserving further research.
Applicants are therefore encouraged to make submissions of research papers which will contribute to the body of knowledge on this topic. Initial submissions will be in the form of an extended abstract. Final submissions will then be reviewed by a committee of experts in the field of competition policy, competition law and industrial organization.
Authors of selected papers will become members of the GlobalExpert Network on Competition Policy and Shared Prosperity. The selected papers (in the form of either completed papers, where available, or a detailed research proposal with initial results) will be presented at the Inaugural International Conference of the World Bank Group-OECD Global Expert Network on Competition Policy to be held in June 2015. The papers will be featured in a joint World Bank Group-OECD publication.
This call for papers invites proposals from policy-makers, practitioners, academics and researchers on topics relevant to the conference theme of promoting effective competition policies for shared prosperity and inclusive growth (i.e. linking economic growth, reduced inequality and poverty reduction). Papers may consider issues at the international, national, sub-national and institutional level.
Several topics could potentially be analyzed that may provide evidence of the importance of competition policy for shared prosperity, including:
- Effects of competition policy and pro-competition regulatory changes:
- Empirical analysis of the effect of pro-competition reforms on variables such as employment, entrepreneurship and wage-distribution, across households with differing socio-economic characteristics or across firms of different size (small- and medium-sized enterprises as compared to larger firms).
- Empirical assessment of the effects of discriminatory policies and rules favorable towards incumbents on key economic variables.
- Empirical assessment of the effects of institutional design of public bodies that promote and protect competition policy on market outcomes.
- The impact of enhanced competition law enforcement action and better competition legal frameworks on improving consumer welfare and increasing shared prosperity and inclusive growth.
- Evaluation of effects of (lack of) competition, as measured by other variables or policy changes:
- Methodologically rigorous estimation of cartel overcharges and their impact on welfare distribution across society as a whole, with a focus on consumers.
- Effects of changes in the level of market contestability in terms of savings for consumers and businesses, shared prosperity and inclusive growth.
- General equilibrium analysis of the effect of higher prices resulting from lack of competition on poverty, incorporating the second-order effects of market power on employment and factor incomes.
- Empirical testing of whether the economic and social outcomes of non-competitive markets predicted by theoretical models hold for different sectors in low and middle income countries.
- Assessment of the relationship between greater trade openness and the degree of competition in domestic markets in their effects on distributional outcomes of trade and competition policies.
- Assessment of the impact of competition distortions in input markets on shared prosperity and inclusive growth.
- Impact evaluation of regulations and policies that affect market competition.
Where possible, submissions are encouraged to identify specific channels of impact on the bottom 40 percent of the income distribution, including:
- The impact on the bottom 40 percent of the income distribution as consumers – For example, using various measures of consumer welfare.
- The impact on the bottom 40 percent of the income distribution as producers – For example, using measures such as income, entry and growth of MSMEs, productivity and innovation.
- The impact on the bottom 40 percent of the income distribution as employees – For example, using measures such as employment, wages and wage inequality (for example across skill level, gender, sector, etc.).
SUBMITTING A PROPOSAL
The following must be submitted to Martha Martínez Licetti (firstname.lastname@example.org):
- An abstract of maximum 500 words by 25 March 2015
- Proposals should be accompanied by a short biography of maximum 500 words.
- Abstracts and papers must be submitted in English.
- Authors will receive notification of acceptance of their abstracts by 1 April 2015.
- Completed papers, where available, or otherwise, a detailed research proposal with preliminary results must be submitted by 24 April 2015. The submissions may receive comments with an option to revise and resubmit by 15 May 2015.
- Final acceptances will be notified by 22 May 2015.
- Accepted papers will be presented at the Inaugural International Conference of the World Bank Group-OECD GlobalExpert Network on Competition Policy, Shared Prosperity and Inclusive Growth to be held in Washington, D.C. in June 2015.
- All final papers should be submitted by 1 September 2015 for inclusion in a World Bank Group-OECD publication.
Daniel Toro-Gonzalez (Universidad Tecnologica de Bolivar), Jill J. McCluskey (Washington State) and Ron C. Mittelhammer (Washington State) explain that Beer Snobs do Exist: Estimation of Beer Demand by Type.
ABSTRACT: Although mass-produced beers still represent the vast majority of U.S. beer sales, there has been a significant growth trend in the craft beer segment. This study analyzes the demand for beer as a differentiated product and estimates own-price, cross-price and income elasticities for beer by type: craft beer, mass-produced beer, and imported beer. We verify that beer is a normal good with a considerably inelastic demand and also find that the cross price elasticity across types of beer is close to zero. The results suggest that there are effectively separate markets for beer by type.
The Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) will hold the second in a series of public workshops, “Examining Health Care Competition,” February 24–25, 2015, to study recent developments related to health care provider organization and payment models that may affect competition in the provision of health care services.
The FTC held the first workshop in this series on March 20–21, 2014. Find information about that workshop on the FTC’s website.
Specific topics for discussion during this second workshop may include:
- Early observations of accountable care organizations
- Alternatives to traditional fee-for-service payment models
- Trends in provider consolidation
- Trends in provider network and benefit design strategies, as well as contracting practices and regulatory activity that may enhance or undermine these strategies
- Early observations of health insurance exchanges
This page provides information on:
For more information, please send e-mail to email@example.com or contact:
They can be reached by mail at:
Legal Policy Section Antitrust Division U.S. Department of Justice 450 Fifth Street NW, Suite 11700 Washington, DC 20530
Press release: Department of Justice and Federal Trade Commission Announce Agenda for Public Workshop on Examining U.S. Health Care Competition (February 18, 2015)
Press release: Department of Justice and Federal Trade Commission to Hold Public Workshop on Examining U.S. Health Care Competition (January 23, 2015)
Dates and Location
|Dates:||Tuesday, February 24, and Wednesday, February 25, 2015|
|Location:||Federal Trade Commission (Ground Floor) Conference Center Constitution Center 400 Seventh Street SW Washington, DC 20024|
Tuesday, February 24, 2015
Registration and Continental Breakfast
Welcome Remarks and Announcements
Tara Isa Koslov, Deputy Director, Office of Policy Planning, Federal Trade Commission
Edith Ramirez, Chairwoman, Federal Trade Commission
Ezekiel J. Emanuel, MD, PhD, Chair, Department of Medical Ethics and Health Policy, Perelman School of Medicine, University of Pennsylvania
|11:10 a.m.– 1:00 p.m.||
Provider Network Design, Contracting Practices, and Regulatory Activity
Helen C. Knudsen, PhD, Economist, U.S. Department of Justice, Antitrust Division, Economic Analysis Group
Stephanie A. Wilkinson, Attorney Advisor, FTC, Office of Policy Planning
Paul Ginsburg, PhD, Norman Topping Chair in Medicine and Public Policy, University of Southern California
Kim Holland, Vice President, State Affairs, Blue Cross Blue Shield Association
James Landman, JD, PhD, Director, Healthcare Finance Policy, Perspectives and Analysis, Healthcare Financial Management Association
Lynn Quincy, Director of the Health Value Resource Hub, Consumers Union
Fiona M. Scott Morton, PhD, Theodore Nierenberg Professor of Economics, Yale University School of Management
Anna D. Sinaiko, PhD, MPP, Research Scientist, Department of Health Policy and Management, Harvard T.H. Chan School of Public Health
Lunch Break (on your own)
Early Observations Regarding Health Insurance Exchanges
Peter J. Mucchetti, Chief, DOJ, Antitrust Division, Litigation I Section
Natalie A. Rosenfelt, Attorney, DOJ, Antitrust Division, Litigation I Section
Cynthia Cox, MPH, Senior Policy Analyst, Program for the Study of Health Reform and Private Insurance, Kaiser Family Foundation
Daniel T. Durham, Executive Vice President for Strategic Initiatives, America’s Health Insurance Plans
Keith M. Marzilli Ericson, PhD, Assistant Professor of Markets, Public Policy, and Law, Boston University School of Management
Pinar Karaca-Mandic, PhD, Associate Professor, Health Policy and Management, University of Minnesota School of Public Health
Kevin Lewis, MPP, CEO, Maine Community Health Options
Richard M. Scheffler, PhD, Distinguished Professor of Health Economics and Public Policy, School of Public Health, University of California, Berkeley
Wednesday, February 25, 2015
Welcome Remarks and Announcements
Caroline N. Holland, Chief Counsel for Competition and Intergovernmental Relations, U.S. Department of Justice, Antitrust Division
William J. Baer, Assistant Attorney General, U.S. Department of Justice, Antitrust Division
Early Observations Regarding Accountable Care Organizations
Ellen Connelly, Attorney, FTC, Bureau of Competition Health Care Division
Matthew C. Mandelberg, Attorney, DOJ, Antitrust Division, Legal Policy Section
Alison Fleury, Senior Vice President of Business Development, Sharp HealthCare
Kristen Miranda, Vice President, Strategic Partnerships and Innovation, Blue Shield of California
David B. Muhlestein, PhD, JD, Senior Director of Research and Development, Leavitt Partners, LLC
Hoangmai Pham, Director of Seamless Care Models Group, Center for Medicare and Medicaid Innovation
Terri L. Postma, MD, Medical Officer and Advisor, Center for Medicare at the Centers for Medicare & Medicaid Services
Simeon A. Schwartz, MD, Founding President and CEO, WESTMED Medical Group
Chapin White, PhD, Senior Policy Researcher, RAND Corporation
|11:00 a.m.– 1:00 p.m.||
Alternatives to Traditional Fee-for-Service Payment Models
Karen A. Goldman, PhD, Attorney Advisor, FTC, Office of Policy Planning
John P. Wiegand, Attorney, FTC, Western Regional Office, San Francisco
Michael E. Chernew, PhD, Leonard D. Schaeffer Professor of Health Care Policy, Harvard Medical School
Suzanne Delbanco, PhD, MPH, Executive Director, Catalyst for Payment Reform
R. Adams Dudley, MD, MBA, Director, Center for Healthcare Value, Philip R. Lee Institute for Health Policy Studies, University of California, San Francisco
Mark W. Friedberg, MD, MPP, Senior Natural Scientist, RAND Corporation
Bruce E. Landon, MD, MBA, MSc, Professor of Health Care Policy and Medicine, Harvard Medical School
Lisa McDonnel, Senior Vice President, Network Strategy and Innovation, UnitedHealthcare Networks
Dana Gelb Safran, ScD, Senior Vice President, Performance Measurement and Improvement, Blue Cross Blue Shield of Massachusetts
Lunch Break (on your own)
Trends in Provider Consolidation
Patrick M. Kuhlmann, Attorney, DOJ, Antitrust Division, Legal Policy Section
Danica Noble, Attorney, FTC, Northwest Regional Office, Seattle
Lawton Robert Burns, PhD, MBA, Director, Wharton Center for Health Management and Economics, University of Pennsylvania
Leemore Dafny, PhD, Director of Health Enterprise Management, Kellogg School of Management, Northwestern University
Martin Gaynor, PhD, E.J. Barone Professor of Economics and Health Policy, Carnegie Mellon University
Kenneth Kizer, MD, MPH, Director, Institute for Population Health Improvement, University of California Davis Health System
James Landman, JD, PhD, Director, Healthcare Finance Policy, Perspectives and Analysis, Healthcare Financial Management Association
Joe Miller, General Counsel, America’s Health Insurance Plans
Summation Roundtable: Antitrust Perspectives on Evolving Provider and Payment Models
Tara Isa Koslov, Deputy Director, FTC, Office of Policy Planning
Leslie C. Overton, Deputy Assistant Attorney General for Civil Enforcement, DOJ, Antitrust Division
Mark J. Botti, JD, Partner, Squire Patton Boggs LLP
Martin Gaynor, PhD, E.J. Barone Professor of Economics and Public Policy, Carnegie Mellon University
Thomas L. Greaney, JD, Chester A. Myers Professor of Law and Co-Director of the Center for Health Law Studies, Saint Louis University School of Law
Dionne Lomax, JD, Partner, Mintz Levin Cohn Ferris Glovsky and Popeo, PC
Mark B. McClellan, MD, PhD, Senior Fellow in Economic Studies & Director of The Health Care Innovation and Value Initiative, The Brookings Institution
Monica Noether, PhD, MBA, Vice President, Charles River Associates
Marina Lao, Director, Office of Policy Planning, Federal Trade Commission
Robert Potter, Chief, Legal Policy Section, U.S. Department of Justice, Antitrust Division
Jacob Humber, UC Davis explores Mergers and Market Power in the US Nitrogen Fertilizer Industry.
ABSTRACT: Nitrogenous fertilizer prices spiked in early 2010 despite the fact that natural gas prices, nitrogen fertilizer’s main production cost, have dramatically fallen during this time period. We hypothesize that a merger which occurred between CF and Terra industries in 2010 exacerbated market power in an already concentrated industry, causing nitrogen fertilizer prices to increase. To test this hypothesis, we propose a structural vector autoregressive (SVAR) model. By including corn futures, natural gas and nitrogen fertilizer prices within an SVAR model we control for demand and supply shocks which affect the nitrogen fertilizer market. The remaining variation in fertilizer prices at 2010 not explained by the model is attributed to the merger. If we set this residual to zero, we can then use the SVAR model to forecast a counterfactual fertilizer price series which represents the price of nitrogen fertilizer in the absencebsence of the merger. Applying this technique to the data suggests that the merger raised prices by roughly 75%. This approach presents a middle-ground between the current methodologies used in the retrospective merger analysis literature. It is more transparent than structural approaches such as Nevo (2000) which make strong assumptions on demand and market conduct. Conversely, this time series approach is more applicable than the reduced form approaches such as Hastings (2004) that employ a difference in difference method and consequently rely on the existence of a credible control group.
Julian Hidalgo and Juan Oviedo, both Universidad del Rosario, describe The impact of Broadband quality standards on Internet services market structure in Colombia.
ABSTRACT: This paper develops a structural model which allows estimating the impact of regulatory decisions looking for the setting of download-speed standards on market structure and performance. We characterize a setting under which quality standards improve both service quality and availability. As to quality, we evaluate the impact of quality standards on the performance of local demand from a detailed database of broadband internet subscribers, discriminated by the main attributes of an internet subscription contract as location, supplier, monthly-fee, download- and upload-speed features. From these results, we are able to identify the effect of quality regulation on the behavior of internet providers in a differentiated product! market approach. As a consequence, we are able to assert that the response of internet service providers to quality regulation is a more intense product differentiation that contributes to demand expansion and therefore to improve broadband penetration indicators.
Wednesday, February 18, 2015
David Encaoua (CES - Centre d'economie de la Sorbonne) and Thierry Madies (CREM) explore DYSFUNCTIONS OF THE PATENT SYSTEM AND THEIR EFFECTS ON COMPETITION.
ABSTRACT: The contemporary tensions between patents and competition no longer reside in the traditional trade-off between the exclusionary right given to an inventor to encourage innovation, and the welfare loss induced by the market power associated to this right. They rather result from three important distortions of the patent system that create conflicts between patents and competition on the product market, the technology market, and the innovation market. The first distortion is related to the existence of dubious or weak patents: too many patents are granted to applications of bad quality according to the patentability criteria. This increases the uncertainty attached to patents, reduces the credibility of the system and calls into question the justification of the patent as a protective mechanism. Second, the configuration of a patent, originally designed in the context of an isolated innovation, is not quite adapted to the context of sequential innovations. While sequential patents requires fine limitations between successive generations of innovations, the strengthening of intellectual property rights, including the extension of the patentable subject matters, opened the door to opportunistic behavior and adversely affected the technological exchanges. Third, the emergence of complex technologies, in which the use of a large number of fragmented patents is necessary to produce a new product, implies the necessity to coordinate the behavior of numerous patent holders. Some entrants in these complex technologies are struck by the imperfect coordinated behavior of these patent holders as illustrated in different settings such as the pooling of complementary patents and the licensing of essential patents by the Standard Setting Organisation members. Very often, patents serve to create ambushes or to capture unjustified rents through excessive license fees, which in turn create barriers to entry for new competitors in the innovation market. Two important consequences of these distortions are derived. First, the resolution of the conflicts cannot rely exclusively on the application of the antitrust law. Second, the distortions lead to a very expensive judicial implementation of the patent system.