Friday, June 19, 2015

Promoting Effective Competition Policies for Shared Prosperity and Inclusive Growth

Promoting Effective Competition Policies for Shared Prosperity and Inclusive Growth

June 23, 2015

Event details

  • Where:  Room MC 13-121, World Bank, 1818 H street NW, Washington, DC
  • When:  9:00am-6:30pm, June 23, 2015
  • CONTACT:                         Martha Martinez Licetti                                              mlicetti@worldbank.org                      

In partnership with the Organisation for Economic Co-operation and Development (OECD), the World Bank Group is hosting a full-day conference to explore the role of competition policy as a tool to promote more sustainable and inclusive economic growth.

 

As part of the World Bank Group's Global Engagement on Competition Policy, this conference will include leading academics, policy makers, and practitioners from across the world, as well as senior officials from international organizations. This event will contribute to inform the joint efforts of the Trade & Competitiveness and Poverty Global Practices of the World Bank Group to understand the relationship between (lack of) competition and the Bank Group's twin goals.

This conference follows an international call for papers to foster empirical research in order to better understand the effects of lack of competition on welfare and contribute to World Bank Group’s efforts towards increasing effectiveness  of competition policy implementation in client countries. 

In addition, this one-day event will feature a roundtable discussion of award-winning stories from the 2014-2015 Competition Advocacy Contest: Inclusive growth for shared prosperity organized by the World Bank Group in collaboration with the International Competition Network (ICN). 

8:30 – 9:00Coffee and registration
 
9:00 – 9:10 Welcoming remarks and overview of the day Anabel Gonzalez, Senior Director of the Trade and Competitiveness Global Practice, the World Bank Group
 
9:10 – 10:40 Session I: Competition and Economic Welfare (Moderator: Jose Guilherme Reis, Manager of the Trade Practice, Trade and Competitiveness Global Practice, the World Bank Group & Ania Thiemann, Global Relations Manager, Competition Division, Directorate for Financial and Enterprise Affairs, OECD) 
  • Microeconomic Policies, Macroeconomic Implications 
  • Competition Policy as a tool to foster shared prosperity and inclusive Growth 
  • Effects of market power on poverty and distribution of wealth
Beatriz de Guindos, Alternate Executive Director at the World Bank Group and former Deputy Director at the Spanish Commission of Markets and Competition
Adriaan Dierx, Principal Administrator, Directorate for Competition of the European Commission (EU) and co-author Janos Varga, Economist, Directorate-General Economic and Financial Affairs of the European Commission (EU)
Sean F. Ennis, Senior Economist, Competition Division, Directorate for Financial and Enterprise Affairs, OECD
Martha M. Licetti, Competition Policy Global Lead, Trade & Competitiveness, the World Bank Group
Diego Petrecolla, Former President of the Competition Commission of Argentina
Carlos Urzúa, Professor of Economics, ITESM
Mexico Tara Vishwanath, Lead Economist, Poverty Global Practice, the World Bank Group
 
Q&A
11:00 Coffee break
 
11:00 – 12:30 Session II: Effects of antitrust enforcement on shared prosperity and inclusive growth (Moderator: Cecile Fruman, Director of the Trade & Competitiveness Global Practice, The World Bank Group & Allan Fels, Professor at the University of Melbourne and Former Chairman of the Australian Competition and Consumer Commission, ACCC) 
  • Antitrust enforcement as a tool for private sector development 
  • Gains and losses of antitrust enforcement in key economic sectors 
  • The true impact of cartels: quantifying actual damages
Tania Begazo, Senior Economist, Trade and Competitiveness Global Practice, WBG
John Connor, Emeritus Professor, Purdue University
Eleanor M. Fox, Professor of Trade Regulation, New York University School of Law
Marc Ivaldi, Professor at the University of Toulouse
Russell Pittman, Director of Economic Research, Antitrust Division, US Department of Justice
Daniel Sokol, Professor, University of Florida and University of Melbourne
Thando Vilakazi, Researcher at Centre for Competition, Regulation and Economic Development (CCRED), South Africa
 
Q&A
 
12:30 – 14:30 Lunch
 
14.30 – 16.00 Session III: Effects of procompetitive sector regulations on shared prosperity and inclusive growth (Moderator: John Davies, Head of the Competition Division, Directorate for Financial and Enterprise Affairs, OECD & Klaus Tilmes, Director of the Trade and Competitiveness Global Practice, the World Bank Group) 
  • Achieving shared prosperity through pro-competitive policies, 
  • Bridging innovation, trade and competition 
  • Tackling anticompetitive effects in key sectors: agribusiness, telecommunications and retail
Tim Buthe, Associate Professor of Political Science and Public Policy at Duke University
Paulo Correa, Secretary, Secretariat of Accompanying Economic Measures of Brazil (SEAE)
Francine Lafontaine, Chief Economist, United States Federal Trade Commission
Marco Gonzalez-Navarro, Assistant Professor, University of Toronto
Georgiana Pop, Economist, Competition Policy Cluster
Loraine Ronchi, Global Solutions Leader, Agribusiness, Trade and Competitiveness Global Practice, the World Bank Group
Alain de Serres, Head of Structural Policies Surveillance Division, Economics Department, OECD
Augusto de la Torre, Chief Economist, LAC Region, the World Bank Group
 
Q&A
 
16:00 – 16:20 Coffee break
 
16:20 – 18:00 Session IV: Building a Culture of Competition and Open Markets for Private Sector Development and Economic Growth (Anabel Gonzalez, Senior Director of the Trade and Competitiveness Global Practice, the World Bank Group & Alessandra Tonazzi, Co-chair of the Advocacy Working Group, International Competition Network and Head of International Relations at the Italian Competition Commission) 
  • Promoting pro-competitive reforms that foster growth and reduce inequality 
  • Promoting awareness of competition benefits in a time of crisis 
  • Promoting cooperation with relevant public bodies in order to balance other public interests with competition goals
Luminita Arama, Head of External Relations, Competition Council of Moldova
Tembinkosi Bonakele, Commissioner, Competition Commission of South Africa
Santiago Davila Philippon, Economic Editor, El Comercio Peru
Francisco Díaz Rodriguez, Superintendent, Superintendence of Competition of El Salvador
Dana Heller, Head of Competition Division, Israel Antitrust Authority
Juan Pablo Herrera Saavedra, Chief Economist, Superintendence of Industry and Commerce, Colombia
Francis Kariuki, Director General, Competition Authority of Kenya
Teemu Karttunen, Senior Research Officer, Finnish Competition and Consumer Authority
Dimitrios Loukas, Vice-Chairman, Hellenic Competition Commission
Charlotte Wezi Malonda, Executive Director, Competition and Fair Trading Commission of Malawi
Eduardo Martínez Chombo, Commissioner, Federal Commission of Economic Competition of Mexico
Udai S Mehta, Director, CUTS Centre for Competition, Investment& Economic Regulation (CUTS CCIER)
Maria João Melícias, Member of the Board, Portuguese Competition Authority
Ming Jie Ng, Senior Assistant Director, Competition Commission of Singapore
Edith Ramirez, Chairwoman, United States Federal Trade Commission
Hilmar Thordarson, Director of Administration, Icelandic Competition Authority Andrey Tsyganov, Deputy Head, Federal Antimonopoly Service of the Russian Federation
 
Q&A
 
19:00 WBG Competition Advocacy Contest
 
Cocktail Reception

June 19, 2015 | Permalink | Comments (0)

Market Share Analysis of Mobile Operators in Turkey

Hulisi Ogut (TOBB Economics and Technology University); Asunur Cezar (TOBB University of Economics and Tehnology); and Merve Guven (Agricultural and Rural Development Support Institution) explore Market Share Analysis of Mobile Operators in Turkey.

ABSTRACT:  We investigate the factors influencing the demand for mobile voice services in Turkey using firm level data which spans from January 2008 to December 2012. The competition in mobile telecommunication market in Turkey has become more intense as a result of mobile number portability (MNP) service introduced in 2008 and 3G technology introduced in 2009. The intense competition not only helps to keep prices down but also supports subscriber growth. Besides prices, we believe that network effects have an impact on market growth. Approximating sales levels using subscription levels and churn rates and using revenue per minute (RPM) as a price measure, we find that while price has a significant negative impact on the demand for mobile services, network effects has a significant positive impact on demand for mobile services. We also estimate own and cross price elasticities of the firms operating in mobile telecommunication market.

June 19, 2015 | Permalink | Comments (0) | TrackBack (0)

Competitive Conditions in the Turkish Banking Systems

TANER SEKMEN, Eskisehir Osmangazi University, TURKEY, OMER AKKUS, Anadolu University, TURKEY, and ILYAS SIKLAR, Anadolu University, TURKEY describe Competitive Conditions in the Turkish Banking Systems.

ABSTRACT:  In this paper, we investigate competition in Turkish banking sector over the period 2003-2012. In order to understand the competitive condition in Turkish banking sector, we use the well-known Panzar-Rosse model based on a nonstructural estimation of the H-statistic by employing the quarterly panel data set. The emiprical evidences indicate that the Turkish banking sector operates under conditions of monopolistic competition. Therefore, although there have been growing structural changes in the Turkish banking sector since 2000s, there is no remarkable change in the market structure of the Turkish banking sector as compared to previous studies and it can still be characterized by the monopolistic competition.

June 19, 2015 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 18, 2015

The Use of Structural Presumptions in Merger Analysis

The Use of Structural Presumptions in Merger Analysis
June 26, 2015
12:00 PM - 1:15 PM ET
The FTC recently required divestitures in two merger investigations stating that when "a proposed merger significantly increases concentration in an already highly concentrated market, a presumption of competitive harm is justified under both the Guidelines and well-established case law." Commissioner Wright dissented in both matters, contending that the majority's "reliance upon such shorthand structural presumptions untethered from empirical evidence subsidize a shift away from the more rigorous and reliable economic tools embraced by the Merger Guidelines in favor of convenient but obsolete and less reliable economic analysis." 

Moderator:
Brendan Coffman, Wilson Sonsini Goodrich & Rosati LLP
Speakers: 
Angela Diveley, Office of Commissioner Joshua D. Wright, Federal Trade Commission 
Abbott (Tad) Lipsky, Latham & Watkins LLP 

Janusz Ordover, Compass Lexecon    

Henry Su, Office of Chairwoman Edith Ramirez, Federal Trade Commission
In-person:
Latham & Watkins
555 11th Street,NW 

Ste 1000, Washington, DC 20004
 

June 18, 2015 | Permalink | Comments (0)

Black Swans, White Whales and Unicorns: When can efficiencies save a merger?

 
  
The International Committee 
and the Mergers & Acquisitions Committee of the ABA Section of Antitrust Law, in partnership with the International Committee and Mergers Committee of 
the CBA National Competition Law Section,
are pleased to present
 
Black Swans, White Whales and Unicorns: When can efficiencies save a merger?
Thursday, June 25, 11:00 am-12:00 pm EST
Teleconference
 
Faculty:
 
Moderator:
·         John D. Harkrider, Axinn, Veltrop & Harkrider LLP
 
Panelists:
·         Deborah L. Feinstein, Federal Trade Commission
·         Brian A. Facey, Blake, Cassels & Graydon LLP
 
Description
 
The U.S. Supreme Court has never approved efficiencies as a defense for mergers.  However, the Sixth, D.C., Eighth and Eleventh Circuits, and most recently, the Ninth Circuit, have suggested that efficiencies could save the day for the right merger – albeit most recently cautioning “we remain skeptical about the efficiencies defense in general and about its scope in particular.”  By contrast, Canada’s Supreme Court has just approved a merger to monopoly based on the efficiencies defense, boldly noting that only “marginal efficiency gains are required for the defense to apply”.  Questions remain in both countries and in cross-border cases as to how efficiencies are to be treated in strategic mergers, which is particularly important given the 2014 publication of the Best Practices on Cooperation in Merger Investigations by the U.S. Antitrust Agencies and the Canadian Competition Bureau.
 

June 18, 2015 | Permalink | Comments (0)

Politicization of Competition Policy –Myth or Reality?

Bill Baer - DOJ has a new speech on Politicization of Competition Policy –Myth or Reality?

His speech was excellent. One short excerpt provides guiding principles for jurisdictions around the world:

Competition policy and competition enforcement succeed where they are based on an unwavering commitment to the competitive process and to protecting consumer welfare. Enforcement decisions need to be fact-based, analytically sound, and legally grounded. When competition enforcement stays tethered to those principles, decisions have a certain predictability and credibility. If competition enforcers stretch to advance noncompetition goals, we risk losing our hard-earned legitimacy. We must not wield our substantial enforcement powers to protect or advance certain competitors or industries. We must call it like we see it, without undue influence from any quarter. Our focus needs to be on ensuring that consumers benefit from a vibrant competitive process. Of course, this commitment to sound antitrust enforcement must be paired with transparency and due process

I think it is telling that he gave this speech in Europe, where there have been instances of politicization.  The focus on politics in competition policy has been on East Asia but it is in fact a global problem.

June 18, 2015 | Permalink | Comments (1)

The Shapley Value as a Guide to FRAND Licensing Agreements

Pierre Dehez, University of Louvain and Sophie Poukens, Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) offer The Shapley Value as a Guide to FRAND Licensing Agreements.

ABSTRACT: We consider the problem faced by standard-setting organizations of specifying Fair, Reasonable And Non-Discriminatory agreements. Along with Layne-Farrar, Padilla and Schmalensee (2007), we model the problem as a cooperative game with transferable utility, allowing for patents that have substitutes. Assuming that a value has been assigned to these "weak" patents, we obtain a formula for the Shapley value that gives an insight into what FRAND agreements could look like.

 

 

June 18, 2015 | Permalink | Comments (0) | TrackBack (0)

Lost in the Clouds: The Impact of Changing Property Rights on Investment in Cloud Computing Ventures

Josh Lerner, Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER) and Greg Rafert, The Analysis Group explore Lost in the Clouds: The Impact of Changing Property Rights on Investment in Cloud Computing Ventures.

ABSTRACT: Our analysis seeks to understand the impact of changing allocations of property rights on investment in new firms. We focus on the Cartoon Network, et al. v. Cablevision decision in the U.S., which narrowed the protection enjoyed by content creators (e.g., movie studios) and gave greater rights to downstream technology firms, as well as decisions in France and Germany that took an opposite view. Our findings regarding relative venture capital investment in the U.S. and Europe, across Europe, and between the various judicial circuits of the U.S. suggest that decisions around the allocation of property rights can have economically and statistically significant impacts on investment in innovative enterprises.

June 18, 2015 | Permalink | Comments (0) | TrackBack (0)

Market Definition, Market Power

Louis Kaplow, Harvard explains Market Definition, Market Power. Highly Recommended!

ABSTRACT: Market definition and market power are central features of competition law and practice but pose serious challenges. On one hand, market definition suffers decisive logical infirmities that render it infeasible, unnecessary, and counterproductive, and the practice of stating market power requirements as market share threshold tests is incoherent as a matter of empirics and policy. On the other hand, market power is often probative of the desirability of liability, yet the typically assumed functional relationship is unexplored and often implausible. These latter deficiencies are addressed through a ground-up analysis of the channels by which market power can be relevant. It is important to explicitly and simultaneously consider both anti-competitive and pro-competitive explanations for challenged practices and to attend to the magnitudes of the social consequences of correct and mistaken imposition of liability in order to identify the various ways and senses in which market power bears on optimal decision-making.

June 18, 2015 | Permalink | Comments (0) | TrackBack (0)

Estimating Dynamic Merger Efficiencies with an Application to the 1997 Boeing-McDonnell Douglas Merger

Wei Zhao, Competition Economics is Estimating Dynamic Merger Efficiencies with an Application to the 1997 Boeing-McDonnell Douglas Merger.

ABSTRACT: Airports have become platforms that derive revenues from both aeronautical and commercial activities. The demand for these services is characterized by a one-way complementarity in that only air travelers can purchase retail goods at the airport terminals. We analyze a model of optimal airport behavior in which this one-way complementarity is subject to consumer foresight, i.e., consumers may not anticipate in full the ex post retail surplus when purchasing a flight ticket. An airport sets landing fees, and, in addition, also chooses the retail market structure by choosing the number of retail concessions to be awarded. We find that, with perfectly myopic consumers, the airport chooses to attract more passengers via low landing fees, and also sets the minimum possible number of retailers in order to increase the concessions’ revenues, from which it obtains the largest share of profits. However, even a very small amount of anticipation of the consumer su! rplus from retail activities changes significantly the airport’s choices: the optimal airport policy is dependent on the degree of differentiation in the retail market. When consumers instead have perfect foresight, the airport establishes a very competitive retail market, where consumers enjoy a large surplus. This attracts passengers and it is exploited by the airport by charging higher landing fees, which then constitute the largest share of its profits. Overall, airport’s profits are maximal when consumers have perfect foresight.

June 18, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 17, 2015

Platform pricing and consumer foresight: The case of airports

Ricardo Flores-Fillol (Universitat Rovira i Virgili) ; Alberto Iozzi (DEF and CEIS, Università di Roma "Tor Vergata"); Tommaso Valletti (Imperial College London, DEF and CEIS, Universita di Roma "Tor Vergata" & CEPR) explore Platform pricing and consumer foresight: The case of airports.

ABSTRACT:  Airports have become platforms that derive revenues from both aeronautical and commercial activities. The demand for these services is characterized by a one-way complementarity in that only air travelers can purchase retail goods at the airport terminals. We analyze a model of optimal airport behavior in which this one-way complementarity is subject to consumer foresight, i.e., consumers may not anticipate in full the ex post retail surplus when purchasing a flight ticket. An airport sets landing fees, and, in addition, also chooses the retail market structure by choosing the number of retail concessions to be awarded. We find that, with perfectly myopic consumers, the airport chooses to attract more passengers via low landing fees, and also sets the minimum possible number of retailers in order to increase the concessions’ revenues, from which it obtains the largest share of profits. However, even a very small amount of anticipation of the consumer surplus from retail activities changes significantly the airport’s choices: the optimal airport policy is dependent on the degree of differentiation in the retail market. When consumers instead have perfect foresight, the airport establishes a very competitive retail market, where consumers enjoy a large surplus. This attracts passengers and it is exploited by the airport by charging higher landing fees, which then constitute the largest share of its profits. Overall, airport’s profits are maximal when consumers have perfect foresight.

June 17, 2015 | Permalink | Comments (0) | TrackBack (0)

Policy of airline competition ~monopoly or duopoly~

Yu Morimoto and Kohei Takeda, Kyoto University examine Policy of airline competition ~monopoly or duopoly~.

ABSTRACT: We show that monopoly is better than competition in term of social welfare for low frequency routes. Competition affects both flight schedules and airfares. Flight schedules get un-even interval by competition and this leads to large scheduling delay cost (SDC). The increment of SDC is large when the number of flights is small. For low frequency routes, the increment of SDC by competition overwhelms the decreasing in the airfare, so monopoly is better than competition.

June 17, 2015 | Permalink | Comments (0) | TrackBack (0)

Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach

Michael L. Polemis, University of Piraeus and Panagiotis N. Fotis, Hellenic Competition Commission offer Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach.

ABSTRACT: This paper provides estimates of price-marginal cost ratios for manufacturing and services sectors in the Eurozone, the US and Japan over the period 1970-2007. The estimates are obtained applying τhe methodology developed by Hall (1988) and extended by Roeger (1995) on the EU KLEMS March 2011 database. The major stylized facts that are emerged from the empirical results based on the Ordinary Least Squares, Two Step Least Squares and Bootstrap methods of estimation are a) there is no evidence of imperfect competition across the majority of industries in Eurozone, US and Japan, b) sectors that are more open to internationalisation, experience relatively lower mark up ratios than the ratios experienced in less open sectors to internationalisation and c) deregulated industries generally have lower mark – up ratios than regulated industries, while fragmented industries generally exhibit higher mark – up ratios than segmented ones.

June 17, 2015 | Permalink | Comments (0) | TrackBack (0)

ECONOMIC RATIONALITY AND THE AREEDA-TURNER RULE

William S Comanor, UCSB and UCLA and Ted E Frech, UCSB discuss ECONOMIC RATIONALITY AND THE AREEDA-TURNER RULE.

ABSTRACT: The Areeda-Turner rule in U.S. antitrust jurisprudence limits successful predatory pricing cases to circumstances where prices can be shown to have been set below marginal costs. While not cast so, the rule reflects the view that predatory pricing is rarely attempted; and even where attempted is rarely successful; and even where attempted and successful, is difficult to identify. In this paper, we examine the theoretical and empirical foundations of this rule, and conclude that it is time to demote the Areeda-Turner analysis from the status of a rule to that of a potentially useful form of inquiry in predatory pricing litigation, but one which is neither necessary nor dispositive.

June 17, 2015 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 16, 2015

Three Stage Dynamic Game of Merger with Incomplete Information on Competition Commission'as Type

Dejan Trifunovic (University of Belgrade, Faculty of Economics) and Bojan Ristic (University of Belgrade, Faculty of Economics) offer Three Stage Dynamic Game of Merger with Incomplete Information on Competition Commission'as Type.

ABSTRACT: Horizontal mergers are of particular interest of anti-trust authorities who must distinguish between mergers that increase market power and are anti-competitive and mergers that result in significant cost savings and are not harmful to consumers. We consider horizontal merger in an environment where competition commission might be strong or weak. Weak commissions are more likely to accept horizontal mergers due to the low level of competency and reputation while strong commissions are more likely to decline horizontal mergers. In developing countries where antitrust policy is not very sophisticated commissions are more likely to be considered as weak and with the accumulation of competence and reputation they move towards strong commissions. This model might explain the situation when international companies that operate in several countries intend to merge. These companies must submit notification to competition commissions in all countries where they op! erate and each national commission estimates the impact of the merger on the national market. This model might also describe the situation when companies operating dominantly in the national market intend to merge, but they don't know the commission's type since they were not dealing with the commission in the past.We model the interaction between companies that intend to merge and competition commission in a dynamic game of incomplete information where the commission's type is unknown to merging companies at the moment when they have to decide about notification submission to competition commission. If they are unsatisfied with commission's decision, they can complain to the court who can confirm commission's decision or overturn the verdict in favour of the companies. We determine that in perfect Bayesian equilibrium decision of merging companies about notification submission depends on possible weak commission's decision and they almost completely ignore strong commission's decision. If merging companies believe that weak commission will accept the merger, they will submit notification. Otherwise, they will restrain from merger. We also conduct an empirical analysis on the case of merger in sugar industry from Serbian regulatory practice that supports the main findings of our model.

June 16, 2015 | Permalink | Comments (0) | TrackBack (0)

Corporate Governance and Cartel formation

Suha Alawi (King Abdulaziz university) describes Corporate Governance and Cartel formation.

ABSTRACT: This paper examines the relationship between corporate governance and cartel formation, A firm’s participation in cartel depends upon the potential problems that may arise due to price fixing and the incentives provided to the management. The top levels of management such as the board of directors and the CEO are responsible for deciding if the firm will participate in the cartel and manage the corporate governance activities of collusive price fixing agreements. The study is focused on UK cartel firms which has the highest representation in the sample. A total number of 150 cartel firms in 52 cases from all around the world between the years 1990 to 2008 are involved in this study, of which 114 are UK firms. Therefore, this study is dominated by UK firms. The study concludes that UK-based cartel firms characterised by having larger board size compared to non-cartel firms; lower percentage of independent directors (non-executive); higher average of! board remuneration; less likely that cartel is formed by family-owned and controlled firm (large shareholders); having older CEOs represented on the board; having CEO who served a less number of years as a director; less likely to have a female CEO represented; more likely to have CEOs whos combined CEO-chairman position; and a higher average of CEOs bonuses and compensation packages.

June 16, 2015 | Permalink | Comments (0) | TrackBack (0)

Price competition and reputation in markets for experience goods: An experimental study

Steffen Huck, Gabriele Lunser and Jean-Robert Tyran explore Price competition and reputation in markets for experience goods: An experimental study.

ABSTRACT: We experimentally examine the effects of price competition in markets for experience goods where sellers can build up reputations for quality. We compare price competition to monopolistic markets and markets where prices are exogenously fixed (somewhere between the endogenous oligopoly and monopoly prices). While oligopolies benefit consumers regardless of whether prices are fixed or endoge-nously chosen, we find that price competition lowers efficiency as consumers pay too little attention to reputation for quality. This provides empirical support to recent models in behavioral industrial organization that assume that consumers may with increasing complexity of the market place focus on selected dimensions of products. We also find that consumers' attention to quality and, hence, provided quality drops when regulated prices are set at levels that are too low.

June 16, 2015 | Permalink | Comments (0) | TrackBack (0)

Relative profit maximization and the choice of strategic variables in duopoly

Atsuhiro Satoh and Yasuhito Tanaka, Faculty of Economics, Doshisha University have written on Relative profit maximization and the choice of strategic variables in duopoly.

ABSTRACT: We study implications of the choice of strategic variables, price or quantity, by firms in a duopoly with differentiated goods in which each firm maximizes its relative profit. We consider general demand and cost functions, and show that the choice of strategic variables is irrelevant in the sense that the conditions of relative profit maximization for the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in a two stage game such that in the first stage the firms choose their strategic variables and in the second stage they determine the values of their strategic variables. We define the relative profit of a firm as the ratio of its profit over the total profit. But, even if we define the relative profit of a firm as the difference between the profits of firms, we can show the same result.

June 16, 2015 | Permalink | Comments (0) | TrackBack (0)

Monday, June 15, 2015

Patents and 'Patent Wars' in Wireless Communications: An Economic Assessment

David Teece, University of California, Berkeley - Business & Public Policy Group, Edward F Sherry, and Peter Grindley, Berkeley Research Group, LLC offer Patents and 'Patent Wars' in Wireless Communications: An Economic Assessment.

ABSTRACT: We examine various conceptual issues raised by the “patent wars” that have occurred in recent years in telecommunications. We conclude that “patent wars” are the natural consequence of the multi-invention nature and massive growth of the industry and the probabilistic and non-self-enforcing nature of patents with the resulting uncertainty about patent validity and infringement, and that concerns about patents have not precluded the successful development and deployment of telecommunications standards or the massive commercial success of new telecommunications technology.

 

June 15, 2015 | Permalink | Comments (0) | TrackBack (0)

When the Price Isn't Right -- Lundbeck and a Path to Analyze Competition in Drug Research and Development

Kent Bernard, Fordham University School of Law analyzes When the Price Isn't Right -- Lundbeck and a Path to Analyze Competition in Drug Research and Development.

ABSTRACT:  The classic starting point in merger analysis is to view market definition and competition in terms of price. But in some cases, such as the one here, price is not the determining factor. This article begins by looking at Lundbeck in enough detail to understand why the court rejected the FTC's price-driven market definition. It then lays out a way to analyze potential competitive impact in such nonprice, patent-centric cases.

 

 

June 15, 2015 | Permalink | Comments (0) | TrackBack (0)