Thursday, October 25, 2018

Some Facts of High-Tech Patenting

Michael Webb, Stanford University - Department of Economics, Nick Short, Harvard University, Nicholas Bloom, Stanford University - Department of Economics; National Bureau of Economic Research (NBER), and Josh Lerner, Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER) offer Some Facts of High-Tech Patenting.

ABSTRACT: Patenting in software, cloud computing, and artificial intelligence has grown rapidly in recent years. Such patents are acquired primarily by large US technology firms such as IBM, Microsoft, Google, and HP, as well as by Japanese multinationals such as Sony, Canon, and Fujitsu. Chinese patenting in the US is small but growing rapidly, and world-leading for drone technology. Patenting in machine learning has seen exponential growth since 2010, although patenting in neural networks saw a strong burst of activity in the 1990s that has only recently been surpassed. In all technological fields, the number of patents per inventor has declined near-monotonically, except for large increases in inventor productivity in software and semiconductors in the late 1990s. In most high-tech fields, Japan is the only country outside the US with significant US patenting activity; however, whereas Japan played an important role in the burst of neural network patenting in the 1990s, it has not been involved in the current acceleration. Comparing the periods 1970-89 and 2000-15, patenting in the current period has been primarily by entrant assignees, with the exception of neural networks.

October 25, 2018 | Permalink | Comments (0)

Wednesday, October 24, 2018

Call for Papers Conference on Rule of Law Challenges in the EU: Implications for Economic Law 10th January 2019, Budapest, Hungary


Call for Papers

Conference on Rule of Law Challenges in the EU: Implications for Economic Law

10th January 2019, Budapest, Hungary

Hungarian Academy of Sciences (MTA)
Centre for Social Sciences Institute of Legal Studies
Centre for Antitrust and Regulatory Studies, University of Warsaw


The rule of law, as a value which the Member States share with each other and with the Union, serves
as the basis of the European Union, its policies and its legal order. It is inherent in the obligations
imposed in law on the Member States and their enforcement and is central to a relationship of mutual
trust between the Member States, in particular their institutions including national courts and tribunals.
On the one hand, the Member States and their citizens legitimately expect that the Union institutions
observe the rule of law in their actions. On the other, the Member States must comply with rule of law
standards in their conduct under the scope of EU law and beyond. Inter-State cooperation in Europe is,
therefore, premised, in politics and in the functional environment of law, on subjecting the exercise of
public powers both at national and European level to similar constitutional requirements.
The rule of law is, in particular, a prerequisite for lawful and effective law enforcement. It requires that
the enforcement authorities apply clearly defined legal rules, including prohibitions, to particular facts
with sufficient transparency, uniformity and predictability so that private actors can reasonably
anticipate what actions would be prosecuted and fashion their behavior accordingly. Their decisions
should be based on sufficiently specific legal rules and their enforcement actions should be predictable
and fair. This is particularly applicable for enforcement in the European Union where it takes place
within compound frameworks combining European and national authorities and subject to rules and
practices developed at both the European and the national level.
Recent developments in Central and Eastern European Member States have put the realization of
Article 2 TEU in the operation of the European Union to jeopardy. EU’s so-called rule of law crisis has
hit hard the European integration project after an only partially resolved economic and financial crisis.
The weakening of constitutional checks and balances and gradual constitutional backsliding in the
Member States have also put pressure on EU enforcement frameworks, especially those where
effective and uniform enforcement depends on the contribution of national authorities not only as a
matter of policy, but also of observance of the rule of law.
In this conference, we aim to analyze the question of whether and how systemic and larger-scale
weakening of constitutional safeguards, in particular the protection of fundamental rights and
institutional independence, have impacted the authority of EU and national economic law and its
enforcement in the Member States. Additionally, we aim to scrutinize the overall impact of these
developments for the European integration process. More specifically, we aim to examine whether and
how national legislations have been disrupting the effective enforcement of economic law in horizontal
and sector specific areas, how objectives of economic patriotism have been implemented in national
law and how economic policy agendas have potentially contradicted those of market integration. Our
investigation extends beyond substantive law; developments in the national institutional framework,
in particular those affecting the independence and accountability of national administrative and
regulatory authorities and those challenging the independence of the judiciary, will also be examined
together with the EU’s reactions (or the lack of its reactions) to these changes.
The organizers welcome contributions in the broad field of economic law and regulation (competition
law, energy law, financial regulation, consumer law etc) that analyze in particular the following issues:
- How does the independence of the judiciary influence effective law enforcement?;
- How does the independence of administrative agencies, for example national competition
authorities (NCAs) influence law enforcement?;
- In what ways is the decentralized enforcement of EU competition law affected by the level of
independence of the NCAs?;
- How effective are accountability mechanisms exercised by national courts and national
parliaments over administrative agencies?;
- How would the Commission’s proposal for ECN+ improve independence and accountability
mechanisms? What are the challenges of the implementation of this proposal?;
- Rule of law hiatuses in the design of common policies and/or the related institutional
- Insufficient rule of law standards and guarantees in the enforcement mechanisms of the EU
Commission and/or, EU networks or in EU agency enforcement;
- Systemic problems with effective judicial protection before EU and/or national courts;
- Systemic problems with the independence of national enforcement and/or regulatory agencies
and national courts;
- Systemic insufficiencies of rule of law standards in administrative and/or judicial enforcement in
the Member States;
- Significant gaps in the authority and/or enforcement of EU legal rules in the Member States.
Abstracts should be no more than 600 words and be sent to Kati Cseres ( ) and Maciej
Bernatt ( not later than 25th November, 2018.
Full papers will be considered for peer-review for the special issue the organizers are planning to put
together after the conference.
Preliminary Programme

Opening Remarks:
Kati Cseres (MTA TK JTI and University of Amsterdam)
Maciej Bernatt (University of Warsaw, Centre for Antitrust and Regulatory Studies)
Keynote address:
Eleanor Fox (New York University): Markets, Competition Law and Democracy
First Session: Rule of law challenges in competition law
Chair: Kati Cseres (MTA TK JTI and University of Amsterdam)
Speaker: Paul Nihoul (Judge, General Court, Court of Justice of the European Union)
Panel: Christopher Harding (Aberystwyth University), Firat Cengiz (University of Liverpool), Maciej
Bernatt (University of Warsaw, Centre for Antitrust and Regulatory Studies)


Parallel sessions with selected papers
Second Session: Economic governance in times of constitutional challenges
Chair: Márton Varjú (MTA TK JTI)
Speaker: Tony Prosser (University of Bristol): Economic Constitutions and Institutional Balance
Panel: Pieter Van Cleynenbruegel (Univeristy of Liège), Wojciech Sadowski (K&L Gates), Kati Cseres
(MTA TK JTI and University of Amsterdam)
Closing speech:
Christopher Vajda (Judge, Court of Justice of the European Union)
Conference close
Venue: HAS Centre for Social Sciences Institute of Legal Studies (H-1097, Budapest, Tóth Kálmán u. 4.)
Queries: Marton Varju,

October 24, 2018 | Permalink | Comments (0)

A Theory of Multihoming in Rideshare Competition

Kevin Bryan, University of Toronto - Strategic Management and Joshua S. Gans, University of Toronto - Rotman School of Management; NBER offer A Theory of Multihoming in Rideshare Competition.

ABSTRACT: We examine competition amongst ridesharing platforms, where firms compete on both price and the wait time induced with idled drivers. We show that when consumers are the only agents who multihome, idleness is lower in duopoly than when consumers face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival. Interestingly, socially superior outcomes may involve monopoly or competition under various multihoming regimes, depending on the density of the city, and the relative costs of idleness versus consumer disutility of waiting.

October 24, 2018 | Permalink | Comments (0)

Legal Principles in Antitrust Enforcement

Harold Houba, VU University Amsterdam, Department of Econometrics; VU University Amsterdam, Tinbergen Institute, Evgenia Motchenkova, VU University Amsterdam - Department of Economics; TILEC, and Quan Wen, University of Washingtonexamine Legal Principles in Antitrust Enforcement.

ABSTRACT: We study antitrust enforcement that aims to channel price‐fixing incentives of cartels through setting fine schedules and detection levels. Fines obey legal principles, such as the punishment should fit the crime, proportionality, bankruptcy considerations, and minimum fines. Bankruptcy considerations limit maximum fines, ensure abnormal cartel profits, and impose a challenge for optimal antitrust enforcement. We derive the fine schedule and detection level that are constrained‐optimal under legal principles and sustainability of cartel prices. This fine schedule lies below the maximum fine, makes collusion on lower prices more attractive than on higher prices, and, hence, relates to the body of literature on marginal deterrence.

October 24, 2018 | Permalink | Comments (0)

Platform Antitrust

Erik Hovenkamp explores Platform Antitrust.

ABSTRACT: Platforms like Uber, Google Search, and Hulu pervade the modern economic landscape. A platform caters to distinct but deeply-interdependent “sides” of customers that derive value or revenues from one another, such as the merchants and cardholders on a credit card network, or the advertisers and consumers on a social media platform. Platform economics creates some important challenges for antitrust policy. A hallmark of two-sided markets—those in which platforms operate—is the need to “get both sides on board.” It is important to consider whether a restrictive practice might be reasonably necessary to accomplish this. But it is just as important not to overstate the novelties of platform commerce and their propensity to justify restraints on trade.

The Supreme Court did just that in its recent AmEx decision. In a 5-4 split, the majority held that a plaintiff cannot make an initial (and rebuttable) showing of harm without demonstrating a net injury across both sides of the market. This kind of onerous balancing act is conventionally reserved for the last stage of the rule of reason’s burden-shifting framework—after the defendant has demonstrated a countervailing efficiency worth balancing. The majority was also confused on the economic issues, characterizing AmEx’s “no-steering” restraint as a courtesy to consumers, when in fact it deprives them of a valuable option while simultaneously undermining price competition market-wide.

This paper considers the general question of how the antitrust laws ought to confront platforms and platform competition, with emphasis on conduct evaluated under the rule of reason. I also address the issues raised in AmEx—both the economic aspects of the original antitrust claim and the broader questions of law raised on appeal. I conclude that, while platform economics does necessitate a number of important considerations, it does not warrant an upheaval of the antitrust laws, contrary to what the AmEx majority suggests.

October 24, 2018 | Permalink | Comments (0)

Huawei loses UK appeal over Unwired Planet global patent-license ruling

Cash, Financial Flexibility, and Product Prices: Evidence from a Natural Experiment in the Airline Industry

Kim, Sehoon (University of Florida) describes Cash, Financial Flexibility, and Product Prices: Evidence from a Natural Experiment in the Airline Industry.

ABSTRACT: Corporate cash holdings impact firms' product pricing strategies. Exploiting the Aviation Investment and Reform Act of the 21st Century as a quasi-natural experiment to identify exogenous shocks to competition in the airline industry, I find that firms with more cash than their rivals respond to intensified competition by pricing more aggressively, especially when there is less concern of rival retaliation. Financially flexible firms based on alternative measures respond similarly. Moreover, cash-rich firms experience greater market share gains and long-term profitability growth. The results highlight the importance of strategic interdependencies across firms in the effective use of flexibility provided by cash.

October 24, 2018 | Permalink | Comments (0)

Tuesday, October 23, 2018

Procedural Fairness in Chinese Antitrust

Jingyuan Ma, Central University of Finance and Economics (CUFE) and D. Daniel Sokol, University of Florida - Levin College of Law examine Procedural Fairness in Chinese Antitrust.

ABSTRACT: This chapter offers an overview of procedural fairness in Chinese antitrust. To a certain extent, issues of procedural fairness are intertwined in China with substantive issues of competition law and economics. Part of the complexity has to do with the newness of the AML and with authorities working through a number of cases, industries, and types of conduct that are issues of first impression. Under such circumstances it takes time to build core competencies on the part of the competition authorities. Sometimes what may seem to be procedural fairness issues (such as delay or requests for information that does not seem directly related to the case at hand) may in fact be a function of authority staff coming up to speed on issues for which there is no institutional knowledge. The level of transparency in the Chinese system, at least on paper, bears a resemblance to the European system of procedural fairness in an antitrust setting. However, in practice, the lack of transparency and due process in China suggests behavior that does not comport with the emerging international norms. Similar to transparency concerns masking public interest factors are due process concerns masking public interest factors. Due to the multiple goals, the Chinese competition authorities are more active in their use of industrial policy on substantive decisions relative to the United States and Europe.

October 23, 2018 | Permalink | Comments (0)

Unbundling the Incumbent and Entry into Fiber: Evidence from France

Marc Bourreau; Lukasz Grzybowski and Maude Hasbi explore Unbundling the Incumbent and Entry into Fiber: Evidence from France.

ABSTRACT: We use panel data on 36,104 municipalities in metropolitan France over the period 2010-2014 to estimate two models of entry into local markets by: (i) alternative operators using wholesale access to the legacy copper network via local loop unbundling (LLU), and (ii) the incumbent and two alternative operators using the fiber technology. We find that a higher number of LLU competitors, and hence a less concentrated local market, has a positive impact on entry by fiber operators. Moreover, the presence of upgraded cable network in the local municipality stimulates fiber deployment. However, firms may choose to upgrade copper lines instead of investing in fiber networks. We use the estimates to calculate entry thresholds into local markets, which are substantially lower for broadband provision via LLU than via fiber and decrease over time. Fiber deployment becomes cheaper over time, but according to our estimates it will remain unprofitable for the vast majority of municipalities in France within the next years.

October 23, 2018 | Permalink | Comments (0)

An Experimental Analysis of the Complications in Colluding when Firms are Asymmetric

Charles F. Mason proposes An Experimental Analysis of the Complications in Colluding when Firms are Asymmetric.

ABSTRACT: I study an indefinitely repeated game where firms differ in size. Attempts to form cartels in such an environment, for example by rationing outputs in a manner linked to firm size differences, have generally struggled. Any successful cartel has to set production shares in a manner that ensures no firm will defect. But this can require allocating sellers disproportionate shares, which in turn makes these tacit agreements difficult to create and enforce. I analyze some experimental evidence in support of this last proposition.

October 23, 2018 | Permalink | Comments (0)

Coalition Loyalty Program Not Working? Maybe You're Doing It Wrong

Gardete, Pedro M. (Stanford University) and Lattin, James M. (Stanford University) ask Coalition Loyalty Program Not Working? Maybe You're Doing It Wrong.

ABSTRACT: In this paper we explore the determinants of profitability for coalition loyalty programs. We consider a setting in which each of two firms competing in one market may form a coalition loyalty program with one of two firms in a different market. Firms in the same program jointly set the reward to consumers who buy from both coalition partners, but they set their own prices independently. We find that these programs are profitable for all firms, even when no value is created by the mere existence of rewards (i.e., when firms and consumers value $1 worth of rewards equally). The intuition is that joint loyalty programs allow each participating firm to leverage its partner's market power and charge higher prices. This result, however, depends crucially on several design elements of the program. First, rewards must be structured so that consumers earn more when they shop broadly across firms in the coalition than when they shop at only a single firm. Second, the reward program manager must be able to take into account the prices of individual firms when setting the value of rewards. Third, firms joining a coalition must be able to negotiate the share of program costs they will carry; firms must be charged according to their value added to the coalition (e.g., firms with greater market power will bear a lower share of program costs) and not taxed as a proportion of their revenues. Our theoretical findings provide insight into the forces underlying coalition loyalty programs in competitive settings and are suggestive of the impact of practical design decisions on program profitability.

October 23, 2018 | Permalink | Comments (0)

Competition for retail deposits between commercial banks and non-bank operators: a two-sided platform analysis

Siciliani, Paolo (Bank of England) explores Competition for retail deposits between commercial banks and non-bank operators: a two-sided platform analysis.

ABSTRACT: Commercial banks’ mainstream business model, which is reliant on a stable supply of retail deposits, continues to be challenged by new and innovative sources of non-bank competition. This paper examines the implications of one such source: a substitute for commercial banks’ personal and saving accounts that provides a safer money storage option thanks to access to a central bank’s balance sheet. I model competition for retail deposits between a bank and a non-bank payment service operator by adopting the two-sided platform framework to capture the payment functionality between consumers and merchants under various configurations. I show that banks’ mainstream business model is most vulnerable when consumers perceive the two service providers as close substitutes; they have the option to sign up with both service providers; their distribution of deposit is skewed; and they are not allowed to make payments across platforms.

October 23, 2018 | Permalink | Comments (0)

Monday, October 22, 2018

Competition over Cursed Consumers

Alessandro Ispano and Peter Schwardmann explain Competition over Cursed Consumers.

ABSTRACT: We model firms’ quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that neither competition nor the presence of sophisticated consumers necessarily protect cursed consumers from being exploited. Exploitation arises if markets are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common policy measures aimed at consumer protection, i.e. mandatory disclosure, third party disclosure and consumer education may all increase exploitation and decrease welfare. Even where these policies improve overall welfare, they often lead to a reduction in consumer surplus.

October 22, 2018 | Permalink | Comments (0)

Price-cost tests and loyalty discounts

Calzolari, Giacomo and Denicolò, Vincenzo analyze Price-cost tests and loyalty discounts.

ABSTRACT: We analyze, by means of a formal economic model, the use of price-cost tests to assess the competitive effects of loyalty discounts. In the model, a dominant firm enjoys a competitive advantage over its rivals and uses loyalty discounts as a means to boost the demand for its product. We show that in this framework price-cost tests are misleading or, at best, completely uninformative. Our results cast doubts on the applicability of price-tests to loyalty discount cases.

October 22, 2018 | Permalink | Comments (0)

Identification of efficient equilibria in multiproduct trading with indivisibilities and non-monotonicity

Iván Arribas (ERI-CES, IVIE, University of Valencia) and Amparo Urbano (ERI-CES, University of Valencia) examine the Identification of efficient equilibria in multiproduct trading with indivisibilities and non-monotonicity.

ABSTRACT: This paper focuses on multiproduct trading with indivisibilities and where a representative agent may have non-monotonic preferences. In this framework, the set of firms' profits (which comes from efficient subgame perfect Nash equilibria) is the Pareto frontier of some projection of the core of the game. We show that under monotonicity efficient subgame perfect Nash equilibria are achieved by single offers and the equilibrium characterization is easy to obtain. When dealing with non-monotonic preferences the problem becomes more challenging. Then, we define a pair of primal-dual linear programming problems that fully identifies the core of the game. A set of modified versions of the dual programming problem characterizes the Pareto-optimal frontier of the core projection on firms' coordinates. Although this approach gives us the payoff-equivalence class (Strong Nash equilibria) of all the efficient subgame perfect Nash equilibria, the number of problems to be solved may be huge.

October 22, 2018 | Permalink | Comments (0)

All-Pay Oligopolies: Price Competition with Unobservable Inventory Choices

Joao Montez and Nicolas Schutz discuss All-Pay Oligopolies: Price Competition with Unobservable Inventory Choices.

ABSTRACT: We study a class of games where stores source unobservable inventories in advance, and then simultaneously set prices. Our framework allows for firm asymmetries, heterogeneous consumer tastes, endogenous consumer information through advertising, and salvage values for unsold units. The payoff structure relates to a complete-information all-pay contest with outside options, non-monotonic winning and losing functions, and conditional investments. In the generically unique equilibrium, stores randomize their price choice and, conditional on that choice, serve all their targeted demand—thus, some inventories may remain unsold. As inventory costs become fully recoverable, the equilibrium price distribution converges to an equilibrium of the associated Bertrand game (where firms first choose prices and then produce to order). This suggests that with production in advance, the choice between a Cournot analysis and a Bertrand-type analysis, as properly generalized in this paper, should depend on whether or not stores observe rivals inventories before setting prices.

October 22, 2018 | Permalink | Comments (0)

Sunday, October 21, 2018

GAFA in China

The latest Competition Lore episode which is now out: GAFA in China with Wendy Ng (Melbourne Law).

October 21, 2018 | Permalink | Comments (0)

Friday, October 19, 2018

On Supply Function Equilibria in a Mixed Duopoly

Carlos, Gutiérrez-Hita (Departamento de Estudios Económicos y Financieros); Vicente-Pérez, José (Departamento Fundamentos Análisis Económico) provide thoughts On Supply Function Equilibria in a Mixed Duopoly.

ABSTRACT: In this paper we present a mixed duopoly model of supply function competition under uncertainty with product differentiation. We find that, regardless the nature of product heterogeneity, the best response of the private firm always arises as strategic complement. Contrary to this, state-owned firm's best response arises either as strategic complement or substitute depending on the product heterogeneity. As a result of the ex post realization of the demand uncertainty, different equilibria are reached.

October 19, 2018 | Permalink | Comments (0)

An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly

Nocke, Volker and Schutz, Nicolas offer An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly.

ABSTRACT: Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

October 19, 2018 | Permalink | Comments (0)

The Strategies of Anticompetitive Common Ownership

C. Scott Hemphill, New York University School of Law and Marcel Kahan, New York University School of Law; European Corporate Governance Institute explain The Strategies of Anticompetitive Common Ownership.

ABSTRACT: Recent scholarship considers anticompetitive effects of concentrated ownership. Empirical evidence reporting that common concentrated owners (“CCOs”) are associated with higher prices and lower output seems to confirm such effects, posing a sharp challenge to both antitrust orthodoxy and corporate governance scholarship.

We identify and examine the causal mechanisms that could link common ownership to higher prices. To do so, we offer a typology of potential mechanisms that varies along three dimensions: whether CCOs induce anticompetitive actions by a firm that raise portfolio value at the expense of firm value or induce actions by a firm that raise portfolio value as well as firm value (firm value-decreasing versus firm value-increasing mechanisms); whether a mechanism operates at the firm level or is instead targeted to specific firm actions (macro versus micro mechanisms); and whether the CCO induces anticompetitive effects through affirmative activities, such as communicating with management or voting on certain proposals, or instead by remaining passive (active versus passive mechanisms). 

We make three major points. First, several mechanisms emphasized in the literature are not, in fact, empirically tested. Of particular interest, most empirical studies do not test firm value-increasing mechanisms or macro mechanisms. Second, some mechanisms are ineffective in raising portfolio value or else infeasible. These problems, which afflict numerous value-decreasing mechanisms and micro mechanisms, include the difficulties institutional CCOs would face in generating, transmitting, and inducing management to accept the anticompetitive strategy. Third, institutional investors have only weak incentives to increase portfolio value. As a result, they would not want to employ any mechanism that generates significant potential reputational costs or legal liability. 

Our main conclusion is that, for most proposed mechanisms, there is no strong theoretical basis for believing that institutional CCOs would want to employ them or else no significant evidence suggesting that they do employ them (or both). The mechanism that is most plausibly employed by institutional CCOs is selective omission: to press for (some) firm actions that increase both firm value and portfolio value, while remaining silent as to actions where the two conflict. 

We also spell out several implications of our analysis. First, CCOs have ambiguous welfare effects. While their conduct may result in higher prices in some markets, they may also prompt increased efficiency and lower prices in other markets. Second, index funds — the paradigmatic common owners — are ill-equipped to employ selective omission or other micro mechanisms. Third, the case for broad reform has not been made. Such reforms are ineffective in dealing with passive mechanisms and counterproductive, imposing new costs without generating significant procompetitive effects for consumers. We advocate a more searching examination of the steps actually taken by CCOs and firms — the who, where, when and how predicted by the most plausible mechanisms.

October 19, 2018 | Permalink | Comments (0)