Tuesday, July 18, 2017
Michael Kopel, University of Graz, Clemens Loffler, Vienna University of Economics and Business, and Thomas Pfeiffer, University of Vienna - Accounting and Control discuss Complementary Monopolies and Multi-Product Firms.
ABSTRACT: According to the classical result on complementary monopolies, a single-product firm unambiguously prefers purchasing complementary inputs from an integrated monopolistic supplier rather than from different non-integrated monopolistic suppliers. In this note, we account for the fact that firms often manufacture multiple products and show that the classical result on complementary monopolies can be reversed in such a case. Purchasing complementary inputs from non-integrated suppliers can be optimal for multi-product firms.
Monday, July 17, 2017
Martin Stanley, former Chief Executive of the UK Competition Commission, is building up an 'Understanding Regulation' website at www.regulation.org.uk which acts, inter alia, as a gateway to more advanced resources. It is proving particularly popular with young students who are encountering economic regulation for the first time. Please bookmark it.
Christian Rojas, University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics and Arturo Briceño examine The Effects of Piracy on Competition: Evidence from Subscription TV.
ABSTRACT: Competition studies that focus on antitrust issues (e.g. market definition, market power) are typically conducted in markets where all firms are assumed to operate legally (competitors are tax-abiding entities, pay for all inputs used in their production process, have paid the proper government licenses to do so, etc.). We investigate competition issues in a market characterized by widespread piracy: subscription TV in Perú. Estimates suggest that 50% of subscription TV users in Perú (30% in Latin America) use an illegal provider. We make use of a unique dataset in which households provided crucial information regarding the (il)legality of their paid TV supplier. Using quantitative antitrust tools based on demand estimation techniques we study the impact that the presence of the informal sector has on competition. Our estimates suggest that the illegal operators constitute a close substitute for (and henceforth significantly constraint the pricing power of) legal operators. This finding can have important antitrust implications: the failure to account for piracy could lead to erroneous conclusions regarding market power measurement and the delineation of the relevant (antitrust) market. This may be particularly important in several industries (especially in the developing world) where the leading operator may be cataloged as “dominant” only in the absence of illegal providers.
Hongyi Li, UNSW Australia Business School, School of Economics, Yi Lu, National University of Singapore (NUS) - Department of Economics, and Zhigang Tao, The University of Hong Kong - School of Business explore Vertical Integration and Firm Productivity.
ABSTRACT: This paper uses three cross‐industry datasets from China and other developing countries to study the effect of vertical integration on firm productivity. Our findings suggest that vertical integration has a negative impact on productivity, in contrast to recent studies based on U.S. firms. We argue that in settings with poor corporate governance, vertical integration reduces firm productivity because it enables inefficient rent‐seeking by insiders.
Csongor István Nagy, University of Szeged, Faculty of Law EU has written on Competition Law's Fair Trial Revolution: Much Ado About Nothing?
ABSTRACT: The paper examines the right to fair trial in the context of the judicial review of competition authority decisions. It briefly presents the general models of judicial review and analyses the recent jurisprudence of the European Court of Human Rights and the Court of Justice of the European Union. The paper argues that although the reader of the recent jurisprudence on the standard of review may easily get the impression that it is no exaggeration to speak about a revolution in Europe, when taking a closer look at the case law, it becomes clear that it is very far from a qualitative change taking the form of a leap.
Andreas Stephan, University of East Anglia (UEA) - Centre for Competition Policy An Empirical Evaluation of the Normative Justiﬁcations for Cartel Criminalisation.
ABSTRACT: A growing number of jurisdictions treat ‘hardcore’ cartel conduct as crime, in the belief that the threat of incarceration is necessary for deterrence. The signiﬁcant economic harm caused by cartels is generally undisputed, but there is disagreement over whether cartel conduct is morally offensive enough to justify criminalisation. Critics argue that it is another example of ‘over-criminalisation’, seeking to regulate an activity that is morally ambiguous. Those in favour have sought to formulate normative justiﬁcations for why cartel conduct should be crime. Many of these rely on the assumption that members of society expect markets to be competitive and believe cartels are undesirable. This paper makes a signiﬁcant contribution by testing this question empirically. Public surveys from the UK, Germany, Italy and the US are used to critically analyse the extent to which normative justiﬁcations for cartel conduct have empirical backing.
Friday, July 14, 2017
Qihong Liu, University of Oklahoma - Department of Economics, Oksana Loginova, University of Missouri, and X. Henry Wang, University of Missouri-Columbia analyze The Impact of Multi-Homing in a Ride-Hailing Market.
ABSTRACT: Platforms such as Uber, Lyft and Airbnb serve two-sided markets with drivers (property owners) on one side and riders (renters) on the other side. Some agents multi-home. In the case of ride-hailing, a driver may drive for both Uber and Lyft, and a rider may use both apps and request a ride from the company that has a driver close by. In this paper, we are interested in welfare implications of multi-homing in such a market. Our model abstracts away from entry/exit by drivers and riders as well as pricing by platforms. Both drivers’ and riders’ surpluses are determined by the average time between a request and the actual pickup. The benchmark setting is a monopoly platform and the direct comparison is a single-homing duopoly. The former is more efficient since it has a thicker market. Next, we consider two multi-homing settings, multi-homing on the rider side and multi-homing on the driver side respectively. Relative to single-homing duopoly, we find that multi-homing on either side improves the overall welfare. However, multi-homing drivers potentially benefit themselves at the cost of single-homing drivers. In contrast, multi-homing riders benefit themselves as well as single-homing riders, representing a more equitable distribution of gains from multi-homing.
Francesco Longo (Department of Economics and Related Studies, University of York, York, UK) ; Luigi Siciliani (Department of Economics and Related Studies, University of York, York, UK) ; Hugh Gravelle (Centre for Health Economics, University of York, York, UK.) ; and Rita Santos (Centre for Health Economics, University of York, York, UK.) ask Do hospitals respond to rivals' quality and efficiency? a spatial econometrics approach.
ABSTRACT: We investigate whether hospitals in the English National Health Service increase their quality (mortality, emergency readmissions, patient reported outcome, and patient satisfaction) or efficiency (bed occupancy rate, cancelled operations, and cost indicators) in response to an increase in quality or efficiency of neighbouring hospitals. We estimate spatial cross-sectional and panel data models, including spatial cross-sectional instrumental variables. Hospitals generally do not respond to neighboursâ€™ quality and efficiency. This suggests the absence of spillovers across hospitals in quality and efficiency dimensions and has policy implications, for example, in relation to allowing hospital mergers.
Johannes Paha and Samuel de Haas analyze Partial cross ownership and explicit collusion.
ABSTRACT: This article studies the unilateral and coordinated eﬀects of non-controlling minority shareholdings (NCMS). It provides a comprehensive model by integrating the established models of Reynolds and Snapp (1986), Flath (1991), Malueg (1992), and Gilo et al. (2006). It is the ﬁrst to add a competition authority. The model ﬁnds that NCMS lower the sustainability of collusion under a greater variety of situations than was indicated by earlier literature. The collusion destabilizing eﬀect of NCMS is particularly prevalent in the presence of an eﬀective antitrust authority.
Thursday, July 13, 2017
Dick Durevall (Department of Economics, School of Business, Economics and Law, Göteborg University) discusses Cost Pass-Through in the Swedish Coffee Market.
ABSTRACT: Cost pass-through to retail prices shows how changes in marginal costs are allocated between producers and consumers, and it is therefore closely related to market structure and competition. This paper uses Swedish data on coffee products at the barcode level to evaluate pass-through from the cost of green coffee beans, the main marginal cost, to the retail price of roasted and ground coffee. First long-run cost pass-through is estimated for each product, and then regression is used to analyse how pass-through varies across market shares, retailer-owned brands and other product characteristics. A general result is that pass-through is roughly complete for products with large market shares, while those with small market shares have low pass-through rates. There is no evidence that retailer-owned brands have higher pass-through than brand-name products with similar market shares, which would be the case if retailer-owned brands avoided double marginalization through vertical integration. Thus, although there is not perfect competition in the Swedish coffee market, a large part of it appears to be highly competitive.
Rory Van Loo, Boston University School of Law advocates Making Credit More Competitive.
ABSTRACT: Despite hostile politicians and more innovative technology challengers, “Too Big To Fail” banks have in recent years grown significantly. This Article identifies an overlooked contributor: the organizational design of the administrative agencies responsible for banking competition. In the United States, that responsibility is spread across five entities, each of which prioritizes other industries or other missions. As a result, no regulator is optimally structured either to develop licenses suitable for fintech startups, or to prevent market failures that impede digital innovation. The Article also explains how the stakes of getting competition right are increasing in the fintech era. Big banks are rapidly becoming more digital and absorbing or partnering with startups. But as Google, Microsoft, and Facebook have shown, technology firms tend to produce higher market concentration than those in other industries. Similar concentration for credit products could greatly reduce consumer welfare and destabilize the financial system. Aligning competition authority, motivation, and expertise in a single body would better position regulators to manage the future of finance.
Jean-Charles Rochet, University of Zurich - Swiss Banking Institute (ISB); University of Toulouse I - Institut d'Economie Industrielle (IDEI); Swiss Finance Institute and John E. Thanassoulis, University of Warwick - Warwick Business School; Oxford-Man Institute, University of Oxford; Nuffield College, University of Oxford examine Intertemporal Price Discrimination with Multiple Products.
ABSTRACT: We study the multiproduct monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller requires intertemporal price discrimination and it can be implemented by dynamic pricing on the cross-sell to the bundle. If consumers are perfectly negatively correlated, reducing the cross-sell price at a single point in time is optimal. For general valuations we show that if the cross-partial derivative of the profit function is negative then dynamic pricing on the cross-sell is more profitable than fixing prices. So we show that the celebrated Stokey (1979) no-discrimination-across-time result does not extend to multiple good sellers when consumers' valuations are drawn from the tilted uniform, the shifted uniform, the exponential, or the normal distribution. We extend our results to welfare, to complementarities in demand, and to the determination of optimal discount schedules.
Wednesday, July 12, 2017
Helfrich, Magdalena ; Herweg, Fabian are Fighting Collusion by Permitting Price Discrimination.
ABSTRACT: We investigate the effect of a ban on third-degree price discrimination on the sustainability of collusion. We build a model with two firms that may be able to discriminate between two consumer groups. Two cases are analyzed: (i) Best-response symmetries so that profits in the static Nash equilibrium are higher if price discrimination is allowed. (ii) Best-response asymmetries so that profits in the static Nash equilibrium are lower if price discrimination is allowed. In both cases, firms' discount factor has to be higher in order to sustain collusion in grim-trigger strategies under price discrimination than under uniform pricing.
The Impact of Process Innovation on Prices: Evidence from Automated Fuel Retailing in the Netherlands
Adriaan R. Soetevent, University of Groningen; Tinbergen Institute and Tadas Bruzikas, University of Groningen study The Impact of Process Innovation on Prices: Evidence from Automated Fuel Retailing in the Netherlands.
ABSTRACT: In the last decade, many European countries have seen a sharp increase in the number of automated fueling stations. We study the effect of this process innovation on prices at stations that are automated and their competitors using a difference-in-differences matching strategy. Our estimates show that prices at automated stations drop by 1.0 to 2.1% immediately after conversion and stabilize at this lower level. We find no indication of competitive spillover effects to neighboring sites at the conventional significance levels. Other than previous studies, our estimates do not reveal a difference in impact between early and later adopters of automation.
Case C-615/15 P Samsung SDI v Commission: The Concept of ‘Single and Continuous Infringement’ and Cartels. Continuity or Change?
ABSTRACT: The Court of Justice of the European Union dismissed Samsung SDI's appeal in its entirety but provides potential clarifications on the test for a single and continuous infringement, as well as on whether to take transactions outside the EEA into account for the fine calculation.
Warren Grimes, Southwestern Law has written about Entrepreneurial Choice: Restoring a Relevant Antitrust Policy.
ABSTRACT: Current antitrust orthodoxy focuses on short term price/output factors. This increasingly criticized model does not adequately protect competition in industries in which individuals and small firms thrive. Small entrepreneurs may be efficient for a variety of reasons, including the incentives that flow from owner operation, the personal relationships that lead to superior service, or the strong creative component of the business. Despite advantages in efficiencies and superior willingness to innovate, small providers have been forced out of the market by intended or unintended effects of antitrust enforcement decisions and regulatory initiatives. Recognizing the twin metrics of consumer choice and entrepreneurial choice is critical to protecting competition and restoring antitrust relevancy. This article explores the concept of entrepreneurial choice and its application to small entrepreneurs. It examines shortcomings in enforcement and regulatory policies in three critical industries (agriculture, healthcare, and communications and entertainment) and compares these industries to the wine and beer industries, where creative small entrepreneurs have a revitalized presence. The article concludes by offering an approach for protecting efficient and in-demand small entrepreneurs while enhancing life choices for consumer and seller alike. In industries in which small entrepreneurs are efficient, this formula includes enhanced merger control, more vigorous antitrust enforcement to maintain open distribution, and greater tolerance for small seller collective actions needed to offset monopsony power.
Tuesday, July 11, 2017
Rasch, Alexander and Gössl, Florian examine The scope for collusion under different pricing schemes.
ABSTRACT: We analyze and compare the incentives to collude under different pricing schemes in a differentiated-products market where customers have elastic demand. We show that allowing firms to set two-part tariffs as opposed to linear prices facilitates collusion at maximum prices independent of the degree of differentiation. However, compared to a situation where firms can only set fixed fees that are independent of the quantity purchased, collusion at maximum prices is less sustainable with two-part tariffs. The results have important implications for competition policy where the perspective—static or dynamic—may be crucial.
Monday, September 11, 2017 from 2:00 PM to 6:30 PM (EDT)
William E. KOVACIC | Professor, George Washington University Law School, Washington, DC
Opening Keynote Speech
Maureen OHLHAUSEN | Acting Chairman, US FTC, Washington, DC
Reforming Current Cartel Enforcement
Aimee IMUNDO | Senior Counsel, Competition Law and Compliance, General Electric, Washington, DC*
Alden ABBOTT | Deputy Director, The Heritage Foundation, Washington, DC
Bryan KEATING | Executive Vice President, Compass Lexecon, Washington, DC
William E. KOVACIC | Professor, George Washington University Law School, Washington, DC
Moderator: Alex OKULIAR | Partner, Orrick, Washington, DC
Enhancing Due Process In Agency Investigations and Enforcement Actions
Douglas GINSBURG | Chief Judge, US Circuit Court for the District of Columbia, Washington, DC
Sharis POZEN | Vice President, Global Competition and Antitrust, General Electric, Washington, DC
Abbott LIPSKY | Former Director of Bureau of Competition, US FTC, Washington, DC
Elaine EWING | Partner, Cleary Gottlieb Steen & Hamilton, Washington, DC
Kenneth ISLEY | Vice President, General Counsel & Secretary, Dow AgroSciences, Indianapolis
Kostis HATZITASKOS | Vice President, Cornerstone Research, Chicago
Alvaro RAMOS | Senior Director, Head of Global Antitrust, Qualcomm, San Diego
Moderator: George CARY | Partner, Cleary Gottlieb Steen & Hamilton, Washington, DC
The New Administration - U.S. Global Antitrust Enforcement Going Forward
Lynda MARSHALL | Chief of the Foreign Commerce Section, US Department of Justice, Washington, DC
Cecilio MADERO | Deputy Director General, DG COMP, Brussels
Frédéric JENNY | Chair, OECD Competition Commission, Paris
Mark GIDLEY | Partner, White & Case, Washington, DC
Randolph E. TRITELL | Director, Office of International Affairs, US Federal Trade Commission, Washington, DC
Steven SALOP | Professor, Georgetown University Law Center | Senior Consultant, Charles River Associates, Washington, DC
Moderator: John HARKRIDER | Partner, Axinn, New York
To be confirmed
* To be confirmed
Haraguchi, Junichi and Matsumura, Toshihiro discuss Government-Leading Welfare-Improving Collusion.
ABSTRACT: We discuss government-leading welfare-improving collusion in a mixed duopoly. We formulate an infinitely repeated game in which a welfare-maximizing firm and a profit-maximizing firm coexist. The government proposes welfare-improving collusion and this is sustainable if both firms have incentives to follow it. We compare two competition structures-Cournot and Bertrand-in this long-run context. We find that Cournot competition yields greater welfare when the discount factor is sufficiently large, whereas Bertrand competition is better when the discount factor is small.