Tuesday, September 20, 2016

Acting Assistant Attorney General Renata Hesse of the Antitrust Division Delivers Opening Remarks at 2016 Global Antitrust Enforcement Symposium

Government-induced Production Commitment in the Open Economy

Hiroaki Ino (School of Economics, Kwansei Gakuin University) and Akira Miyaoka (Graduate School of Economics, Kansai University) investigate Government-induced Production Commitment in the Open Economy.

ABSTRACT: We investigate the welfare effects of the strategic regulation that induces a collusive leadership of the organized domestic incumbents under free entry of foreign firms. We formulate such a strategic regulation in the quantity-setting competition where the domestic firms can collusively make their production decision before the entry of foreign firms, and demonstrate how strongly the regulation works in terms of domestic social welfare by comparing to the welfare-maximizing import tariff policy. We show that when the products of firms are homogeneous, that strategic regulation always yields higher welfare than the import tariff does even if the regulator perfectly engages in the domestic-industry protection and ignores consumer surplus. We also consider the differentiated products and demonstrate that the similar result holds when the degree of differentiation is relatively small, but the converse holds when the degree of differentiation is relatively large even if the regulator is perfectly benevolent.

September 20, 2016 | Permalink | Comments (0)

Competition, Price Dispersion and Capacity Constraints: The Case of the U.S. Corn Seed Industry

Cornelia Ilin, University of Wisconsin and Guanming Shi, University of Wisconsin investigate Competition, Price Dispersion and Capacity Constraints: The Case of the U.S. Corn Seed Industry.

ABSTRACT: This study examines the effect of competition on price dispersion and argues that the effect is contingent on the ability of firms to meet market demand. Our comparative static results show that competition among symmetrically capacity-constrained firms leads to a price decrease in the lower tail of the price distribution and a price increase in the upper tail. In contrast, competition among symmetrically capacity-unconstrained firms, or among firms with asymmetric capacities leads to an overall price increase along the distribution function. To investigate these findings empirically, we use a novel data set from the U.S. corn seed industry with farm-firm-level sales information for conventional and genetically modified corn seeds between 2004 - 2009. We estimate the empirical model using the IV Quantile Regression, and found evidence consistent with the above mentioned comparative static results. The analysis also shows that capacity-unconstrained seed firms charge a price premium, confirming the positive relationship between product availability and pricing found in our theoretical model.

September 20, 2016 | Permalink | Comments (0)

ABA Section of International Law 2016 Fall Meeting

The ABA Section of International Law 2016 Fall Meeting in Tokyo has a number of antitrust panels.

2016 Fall Meeting Preliminary Brochure

September 20, 2016 | Permalink | Comments (0)

Tirole's Industrial Regulation and Organization Legacy in Economics

Drew Fudenberg states Tirole's Industrial Regulation and Organization Legacy in Economics.

ABSTRACT: Jean Tirole was awarded the 2014 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his analysis of market power and regulation. This paper provides an overview of some of that work, and of his related contributions to game theory.

September 20, 2016 | Permalink | Comments (0)

Monday, September 19, 2016

Competition, Innovation, and the Number of Firms

Pedro Bento (Texas A&M University, Department of Economics) empirically examines Competition, Innovation, and the Number of Firms.

ABSTRACT: I look at manufacturing firms across countries and over time, and find that barriers to competition actually increase the number of firms. This finding contradicts a central feature of all current models of endogenous markups and free entry, that higher barriers should reduce competition and firm entry, thereby increasing markups. To rationalize this finding, I extend a standard model in two ways. First, I allow for multi-product firms. Second, I model barriers as increasing the cost of entering a product market, rather than the cost of forming a firm. Higher barriers to competition reduce the number of products per firm and per market, but increase markups and the total number of firms. Calibrating the model to U.S. data, I estimate cross-country differences in consumption as large as 3-fold due to observed differences in barriers to competition. In addition, increasing barriers generates either a negative or inverted-U relationship between firm-level in! novation and markups. While higher markups encourage product-level innovation through the usual Schumpeterian mechanism, firm-level innovation (at least eventually) drops as firms reduce their number of products. I provide new evidence supporting these two novel implications of the model - that product-level innovation increases with barriers to competition, while the number of products per firm decreases.

September 19, 2016 | Permalink | Comments (0)

Production Networks, Geography and Firm Performance

Andrew B. Bernard; Andreas Moxnes and Yukiko U. Saito examine Production Networks, Geography and Firm Performance.

ABSTRACT: This paper examines the importance of buyer-supplier relationships, geography and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down the firm's marginal production costs. We test the theory by exploiting the opening of a high-speed (Shinkansen) train line in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms' buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, consistent with the model.

September 19, 2016 | Permalink | Comments (0)

On Prices' Cyclical Behaviour in Oligopolistic Markets

Luca Lambertini (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy) and Luigi Marattin (Department of Economics, University of Bologna, Italy) provide thoughts On Prices' Cyclical Behaviour in Oligopolistic Markets.

ABSTRACT: We revisit the discussion about the relationship between price's cyclical features, implicit collusion and the demand level in an oligopoly supergame where a positive shock may hit demand and disrupt collusion. The novel feature of our model consists in characterising the post-shock noncooperative price and comparing it against the cartel price played in the last period of the collusive path, to single out the conditions for procyclicality to arise both in the short and in the long-run.

September 19, 2016 | Permalink | Comments (0)

Quantity Competition under Resale Price Maintenance when Most Favored Customers are Strategic

Yossi Aviv and Andrei Bazhanov and Yuri Levin and Mikhail Nediak conceptualize Quantity Competition under Resale Price Maintenance when Most Favored Customers are Strategic.

ABSTRACT: Legal studies usually treat a policy of a manufacturer or retailer as socially harmful if it reduces product output and increases the price. We consider a two-period model where the first-period price is fixed by resale price maintenance (RPM) and resellers endogenously decide to use another "collusion suspect," meet-the-competition clause with a most-favored-customer clause (MFC), to counteract strategic customer behavior. As a result of MFC, second-period (reduced) price increases, and resellers' inventories decrease. However, customer surplus may increase and aggregate welfare increases in the majority of market situations. MFC can not only decrease the losses in welfare and resellers' profits due to strategic customers but, under reseller competition, may even lead to higher levels of these values than with myopic customers, i.e., to gains from increased strategic behavior. MFC may create "MFC-traps" for resellers, where one of possible market outcome! s yields a gain from increased strategic behavior while another results in a reseller profit less than the worst profit in any stable outcome without MFC. With growing competition, benefits or losses from MFC can be higher than losses from strategic customer behavior.

September 19, 2016 | Permalink | Comments (0)

Friday, September 16, 2016

How Firms Navigate Cooperation and Competition in Nascent Ecosystems

Douglas Hannah, University of Texas at Austin - Red McCombs School of Business and Kathleen M. Eisenhardt, Stanford University - Management Science & Engineering discuss How Firms Navigate Cooperation and Competition in Nascent Ecosystems.

ABSTRACT: Competition and cooperation are fundamental to strategy, and often closely intertwined. But how firms successfully navigate both competition and cooperation over time, particularly in dynamic industries, is not clear. Via an in-depth multiple-case study of five firms in the US residential solar industry, we induct a theoretical framework to explain how firms successfully navigate nascent ecosystems over time. We identify three distinct strategies, each of which distinctively balances cooperation and competition, and each of which carries its own unique advantages and disadvantages. In doing so, we contribute insights into research on bottlenecks, kingpins, and the origins of strategy. Overall, we offer insight into the interplay between cooperation and competition, and crystallize the pivotal role of bottlenecks.

September 16, 2016 | Permalink | Comments (0)

Antitrust Chronicle September 2016

Antitrust Chronicle – Patents and Standard Settings
Antitrust Chronicle – Patents and Standard Settings

Antitrust Chronicle – Patents and Standard Settings

This month, the Antitrust Chronicle brings you an interesting and complex issue at the crossroads of antitrust and intellectual property rights, the analysis of standard settings. Fair, Reasonable and Non-Discriminatory… the infamous ‘FRAND.’ We see this term time and time again in antitrust policy. None more so than when linked to the issue of standard […]…

 
 

September 16, 2016 | Permalink | Comments (0)

Happy Mid-Autumn Festival

I want to wish all of my friends in East Asia a Happy Mid-Autumn Festival.

 

I thought that Neil Young's Harvest Moon might be an appropriate song to honor the festival.

 

  

September 16, 2016 | Permalink | Comments (0)

Mergers and Innovation: Evidence from a Panel of U.S. Firms

Mahdiyeh Entezarkheir, University of Western Ontario - Huron University College and Saeed Moshiri, Allameh Tabatabaei University - Economics; Saint Thomas More College University of Saskatcehwan view Mergers and Innovation: Evidence from a Panel of U.S. Firms.

ABSTRACT: The impact of post-merger changes in market structure on innovation is a concern for anti-trust policies. Combining four different data sets, we construct a panel data set of mergers among publicly traded U.S. manufacturing firms from 1980 to 2003 and investigate merger impacts on innovation, controlling for endogeneity and factors such as market share, size, industry, and time. Our proxy for innovation is based on the citation-weighted patent stocks, which includes information on not only the merged entities in the post-merger period similar to previous studies, but also both target and acquiring firms in the pre-merger period and the merging year. We find that mergers are positively and significantly correlated with firms' innovation, and firms with large market share experience a greater boost in innovation from mergers. Merger effects on innovation are larger in the long run and heterogeneous across industries. Our findings are robust to alternative measures of innovation.

September 16, 2016 | Permalink | Comments (0)

The Empirical Economics of Online Attention

Andre Boik, Shane Greenstein, and Jeffrey Prince examine The Empirical Economics of Online Attention.

ABSTRACT: In several markets, firms compete not for consumer expenditure but instead for consumer attention. We model and characterize how households allocate their scarce attention in arguably the largest market for attention: the Internet. Our characterization of household attention allocation operates along three dimensions: how much attention is allocated, where that attention is allocated, and how that attention is allocated. Using click-stream data for thousands of U.S. households, we assess if and how attention allocation on each dimension changed between 2008 and 2013, a time of large increases in online offerings. We identify vast and expected changes in where households allocate their attention (away from chat and news towards video and social media), and yet we simultaneously identify remarkable stability in how much attention is allocated and how it is allocated. Specifically, we identify (i) persistence in the elasticity of attention according to income and (ii) complete stability in the dispersion of attention across sites and in the intensity of attention within sites. We illustrate how this finding is difficult to reconcile with standard models of optimal attention allocation and suggest alternatives that may be more suitable. We conclude that increasingly valuable offerings change where households go online, but not their general online attention patterns. This conclusion has important implications for competition and welfare in other markets for attention. 

September 16, 2016 | Permalink | Comments (0)

Thursday, September 15, 2016

IEEE IP Policy Update Under the Scrutiny of the EC Guidelines on Horizontal Cooperation

Olia Kanevskaia, Tilburg Law and Economics Center (TILEC) and Nicolo Zingales, Tilburg Law and Economics Center (TILEC); Tilburg University - Tilburg Institute for Law, Technology, and Society (TILT) offer IEEE IP Policy Update Under the Scrutiny of the EC Guidelines on Horizontal Cooperation.

ABSTRACT: In 2015, the Institute of Electrical and Electronics Engineers’ Standardization Association (IEEE-SA) made some controversial changes to its patent policy. The changes include in particular a prescribed method of calculation of FRAND royalty rates, and a request to members holding a standard essential patent (SEP) to forego their right to seek an injunction except under limited circumstances. The amended patent policy was adopted by the IEEE Board following favorable business review letter by the US Department of Justice, which found any potential competitive harm from the policy to be outweighed by potential pro-competitive benefits.

In this paper, we examine whether these changes might impact the regime of “safe harbor” set up for standardization agreements under EU competition law, in particular the guidelines provided by the European Commission. Given the importance placed by the guidelines on procedural safeguards to prevent SSO activities from resulting in anti-competitive cooperation, we contrast the ad hoc process leading to this policy change with the procedures in place for regular standard-setting activity.

September 15, 2016 | Permalink | Comments (0)

No Shortage of Theories: The Role of Capacity in Antitrust Analysis

Seth B. Sacher, Federal Trade Commission and Jeremy Sandford, Federal Trade Commission offer No Shortage of Theories: The Role of Capacity in Antitrust Analysis.

ABSTRACT: Issues of productive capacity can play a role in nearly every aspect of competition analysis. This paper provides an overview of the economic literature on capacity and the role that capacity has played in actual antitrust and competition law enforcement. The goal is to aid practitioners in matters where capacity issues potentially play a significant role. For the most part, the theoretical role of capacity in various aspects of competition analysis is ambiguous and the empirical literature is similarly inconclusive. Moreover, in many situations, measuring excess capacity may be quite difficult. Given the theoretical and empirical ambiguity regarding the role of excess capacity, or the lack thereof, the overall theme of our analysis is that practitioners should not presume any particular impact in the absence of strong case-specific evidence regarding capacity’s effects.

 

 

September 15, 2016 | Permalink | Comments (0)

Conference “Impact Assessment of Interventions of Competition and Consumer Authorities” November 16, 2016

ACM Conference

Aerial view of NEMO science museum

The Netherlands Authority for Consumers & Markets (ACM) is organising a conference on “Impact Assessment of Interventions of Competition and Consumer Authorities”, to pay tribute to the ten-year anniversary of the ACM’s (former NMa’s) Chief Economist Office. The conference will take place on November 16 at NEMO Science Museum in the centre of Amsterdam.

Over the last few years, impact assessment has received a lot of attention from government and market authorities. ACM has also invested in estimating the effectiveness of its interventions. Due to impact assessment, market authorities can learn and improve upon their future interventions. Moreover, they can publicly justify their work, since the effectiveness of their actions are made insightful: economic effects for consumers as well as behavioural changes by producers and suppliers. During the conference we assess various methodologies used in impact assessment, and the lessons learned in impact assessments carried out by various competition and consumer authorities.

Registration form

Register for the conference 

Impact assessment logo conference

 
 

September 15, 2016 | Permalink | Comments (0)

Antitrust liability for licensing boards after North Carolina Dental: antitrust preemption as a penalty default?

James Cooper, George Mason asks Antitrust liability for licensing boards after North Carolina Dental: antitrust preemption as a penalty default?

ABSTRACT: Most professions in the USA are regulated by boards composed of industry practitioners, who in their official roles routinely engage in anticompetitive conduct. Until the Supreme Court’s landmark decision in North Carolina State Board of Dental Examiners v FTC, many believed that such conduct was beyond the reach of antitrust enforcement as long as it was taken pursuant to state policy to displace competition—a standard met with relative ease. After North Carolina Dental, states now must additionally take ownership of the anticompetitive actions of these boards to avoid the full force of the antitrust laws. In this manner, North Carolina Dental has the potential to prompt a large-scale restructuring of the state regulatory apparatus. This article explores the potential for antitrust preemption to play a role in this restructuring. I argue that, to the extent that unsupervised boards’ anticompetitive conduct would be justified only by non-competition concerns, they are rendered defenceless in any rule of reason inquiry. As such, the conduct at issue is subject to a de facto per se standard, potentially subjecting the law authorizing such conduct to antitrust preemption. Rather than adjusting the rule of reason inquiry to allow courts to weigh non-competition concerns in these cases, the better alternative would be to preempt the laws altogether. This approach has several advantages. First, it would avoid a dissonance between antitrust and due process inquiries into the same conduct. Secondly, it would act as a penalty default for states, and like penalty defaults in contracts, such a rule would assign the regulatory decision to the low-cost information provider—the state, rather than the court. Finally, this approach vindicates federalism to a greater extent than a modified rule of reason. The only role for a federal court under a preemption approach would be to uphold or strike down the law granting the board authority to engage in the suspect conduct. This decision, moreover, would be based on an objective analysis of the board’s regulatory structure, rather than a subjective weighing of competition and non-competition concerns.

September 15, 2016 | Permalink | Comments (0)

Complementary Monopolies and Bargaining

Dan Spulber, Northwestern has a paper that (surprisingly) is against antitrust forbearance, at least in the area of conglomerate and vertical mergers where the justification is the Cournot effect regarding complementarities in his paper Complementary Monopolies and Bargaining.

ABSTRACT: How should complementarities affect antitrust merger policy? I introduce a two-stage strategic model in which complementary input sellers o¤er supply schedules to producers and then engage in bilateral bargaining with producers. The main result is that there is a unique weakly dominant strategy equilibrium and the equilibrium attains the joint profit maximizing outcome. Output equals that of a bundling monopoly and total input prices are lower than prices with a bundling monopoly. The result holds with perfect competition in the downstream market. The result also holds with oligopoly competition in the downstream market. This implies that the Cournot Effect does not hold when companies negotiate supply contracts rather than using posted prices. The analysis has implications for antitrust policy towards vertical, conglomerate, and horizontal mergers.

 

 

September 15, 2016 | Permalink | Comments (0)

Wednesday, September 14, 2016

Prices and Competition. Evidence from a Social Program

Emilio Aguirre (Ministerio de Desarrollo Social (Uruguay)) ; Pablo Blanchard (Ministerio de Desarrollo Social (Uruguay)) ; Fernando Borraz (Banco Central del Uruguay) ; and Joaquin Saldain (Banco Central del Uruguay) offer Prices and Competition. Evidence from a Social Program.

ABSTRACT: We use a micro-price dataset to analyze the impact on prices of a social program in Uruguay that allow the beneficiaries to purchase food, beverages and cleaning items exclusively in certain small retailers. We find that the beneficiaries pay significantly higher prices in relation to prices in other retailers. We find this result for the whole country with the exception of areas with the highest retailer density in the capital city, Montevideo.

September 14, 2016 | Permalink | Comments (0)