Thursday, April 18, 2019

Measuring the Welfare of Intermediation in Vertical Markets

By: Donna, Javier D.Pereira, PedroPires, TiagoTrindade, Andre
Abstract: We empirically investigate the welfare implications of intermediaries in oligopolistic markets, where intermediaries offer additional services to differentiate their products from the ones of the manufacturers. Our identification strategy exploits the unique circumstance that, in the outdoors advertising industry, there are two distribution channels: consumers can purchase the product either directly from manufacturers, or through intermediaries. We specify a differentiated products’ equilibrium model, and estimate it using product-level data for the whole industry. On the demand side, the model includes consumers who engage in costly search with preferences that are specific to the distribution channel. On the supply side, the model includes two competing distribution channels. One features two layers of activity, where manufacturers and intermediaries bargain over wholesale prices, and intermediaries compete on final prices to consumers. The other is vertically integrated. The estimated model is used to simulate counterfactual scenarios, where intermediaries do not offer additional services. We find that the presence of intermediaries increases welfare because the value of their services outweighs the additional margin charged.
Keywords: Intermediaries, vertical markets, search frictions, bargaining, outdoor advertising
JEL: D83 L42 L81 M37
Date: 2018–07

April 18, 2019 | Permalink | Comments (0)

Wednesday, April 17, 2019

The Effect of Horizontal Mergers, When Firms compete in Prices and Investments

By: Massimo MottaEmanuele Tarantino
Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.
Keywords: horizontal mergers, innovation, investments, research joint ventures, competition
JEL: K22 D43 L13 L41
Date: 2018–11

April 17, 2019 | Permalink | Comments (0)

AAI’s Series on Competition in the Delivery and Payment of Healthcare Services: Part II - Promoting Competition in Healthcare Enforcement and Policy: Framing an Active Competition Agenda

Tim Greaney, Hastings and Barak Richman, Duke offer AAI’s Series on Competition in the Delivery and Payment of Healthcare Services: Part II - Promoting Competition in Healthcare Enforcement and Policy: Framing an Active Competition Agenda.

ABSTRACT: The policy community, albeit belatedly, now fully recognizes the economic dangers of highly concentrated healthcare markets. The Federal Trade Commission (FTC) and states continue to closely scrutinize hospital mergers. Recent successes by the U.S. Department of Justice (DOJ) in challenging mergers of health insurers are additional indications of invigorated enforcement in the healthcare payment sector. In addition, the FTC, DOJ, and State Attorneys General (AGs) have appropriately dedicated substantial resources to healthcare antitrust enforcement and have achieved significant victories in litigation.

Traditional merger review, however, will be inadequate to compensate for the policy failures of the past. In large part because failed antitrust interventions, overwhelmed enforcers, or mistaken beliefs that market dynamics or negotiated settlements will preserve market competition, both provider and insurer markets across the country are highly concentrated, and dominant providers currently enjoy enormous pricing power. To create the market dynamics that consumers desire, policymakers will need to pursue proactive approaches in healthcare markets that confront extant market power and aim to limit its damage. It will also require exploring innovative paths to stimulate lost or impeded competition. Over the past several years, the FTC has enhanced its advisory and advocacy efforts on healthcare competition issues in numerous forums, and its leadership will need to continue exploring its influence outside its traditional purview.

April 17, 2019 | Permalink | Comments (0)

The Evolving Antitrust Treatment of Labor-Market Restraints: From Theory to Practice

Randy Stutz, AAI explores The Evolving Antitrust Treatment of Labor-Market Restraints: From Theory to Practice.

ABSTRACT: With mounting macroeconomic evidence of increased concentration and higher markups, and large firms occupying several important, “winner-takes-most” markets, the threats posed by powerful buyers in the economy have become more pronounced. In particular, experts and enforcers have been paying closer attention to the effects of market power and excessive bargaining leverage on the buyer side of the labor market, which implicates competition among employers to hire and retain workers.

Although buyer power in labor markets has received relatively little antitrust attention historically, the status quo has shifted. Over the last several years, in an initiative begun by the Obama Administration and continued during the Trump Administration, the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have moved to criminalize naked no-poaching and no-hiring agreements among competing employers. At the same time, state enforcers and the private plaintiffs’ antitrust bar have focused resources and enforcement efforts on collusive buyer restraints harming workers, including employees or individual sellers in the agricultural, nursing, high-tech, fast-food, and other sectors. And in merger cases, the government has advanced theories of harm predicated on depressed input prices paid to small sellers of products and services, although not yet on depressed wages. In addition to these important developments, scholars and policy experts have been exploring the nature and extent of labor-market power, as well as possible solutions.

This white paper explores the past, present, and future antitrust treatment of mergers and conduct that have anticompetitive effects in labor markets. After considering possible explanations for past failures to adequately address buyer power in labor markets, the paper catalogues and summarizes recent scholarly literature on the intersection of antitrust and labor policy. The paper concludes by analyzing emerging themes and questions from the recent literature and making recommendations to policymakers and enforcers to facilitate the translation of new insights into effective antitrust enforcement.

Some of the major takeaways from the analysis include the following:

Before real progress can be made in policing mergers on the basis of anticompetitive labor-market effects, practitioners of antitrust merger law – including antitrust lawyers and economists – must begin to identify and resolve the practical challenges associated with litigating and remedying actual merger fact patterns.

If enforcers are not yet able to adequately measure and predict employee substitution in labor markets, enforcers may wish to begin by focusing on employer mergers among labor-market rivals which have previously been parties to a no-poaching agreement, or where there is other direct evidence that a transaction threatens to create or enhance buyer labor-market power.

Although the Clayton Act declares that “the labor of a human being is not a commodity or article of commerce,” this language is designed to protect worker restraints, not employer restraints. Enforcers should not be concerned that the labor exemption or the “affecting commerce” requirement prevent merger enforcement on the basis of anticompetitive labor-market effects, notwithstanding an absence of, or inability to prove, downstream product-market harms.

The Antitrust Division should continue to aggressively pursue criminal prosecutions to deter naked no-poaching and wage-fixing agreements, and the plaintiffs’ antitrust bar and state attorneys’ general should continue to seek deterrence and compensation for victims through investigations and civil suits, including treble damages class actions.

Given the practical difficulties of challenging vertical and putatively ancillary no-poaching and employee non-compete agreements, policy advocates should support state or federal legislative reform as a matter of sound competition policy, particularly when such agreements are imposed on low-skill, low-wage workers in concentrated, high-turnover industries.

The FTC and DOJ should hire in-house labor economists, and Congress should increase the resources available to the agencies accordingly.

The agencies should assimilate the new labor-antitrust literature, conduct their own policy studies on the connection between labor and product market concentration and wages, and update the Horizontal Merger Guidelines once they are institutionally prepared to police mergers on the basis of threatened anticompetitive labor-market effects.

Effective policing of mergers and conduct on the basis of anticompetitive labor-market effects does not require legislative reform or eliminating the consumer welfare standard.

April 17, 2019 | Permalink | Comments (0)

Revisiting Antitrust Immunity for International Airline Alliances

Diana Moss, AAI is Revisiting Antitrust Immunity for International Airline Alliances.

ABSTRACT: The paper makes the case for why the U.S. Department of Transportation (DOT) should revisit its policy surrounding grants of antitrust immunity for the international airline alliances. It describes the implications of immunized alliances for domestic competition and consumers, particularly in light of a decade of consolidation among U.S. alliance carriers.

The debate over competition in the U.S. airline industry has focused to date on high profile developments in domestic airline markets. These issues include mergers between domestic legacy (i.e., network) and low cost carriers; concerns over market entry such as access to takeoff and landing slots at congested airports; and alleged anticompetitive coordination on airline capacity and ancillary fees. Concerns over dwindling choice and quality of air service have also come sharply into focus in recent years. In an industry that could not be more consumer-facing, these concerns should be a priority for competition enforcers, policymakers, and legislators.

Other important issues have recently worked their way onto the domestic aviation radar screen. One is U.S. Department of Transportation policy toward granting antitrust immunity (ATI) for the international airline alliances. The large U.S. network carriers dominate the three large alliances – Star, SkyTeam, and oneworld. The alliance engage in joint-venture type coordination on schedules and fares and share resulting revenues and profits. DOT policy toward ATI appears to be shifting as competitive concerns over immunizing coordinated conduct escalate and claims of public benefits are viewed more skeptically.

A related issue is entry by non-allied foreign carriers on international routes that serve U.S. destinations. These include Norwegian Air UK Limited and the Gulf Carriers (Qatar, Emirates, and Etihad). The large U.S. legacy carriers have vigorously opposed entry into U.S. markets by these carriers. In parallel, domestic airlines are also expanding their stakes in foreign carriers. This is likely motivated by expansion opportunities abroad but also by gaining strategic control over foreign airlines’ decisions regarding expansion into U.S. markets.

The foregoing developments highlight the growing nexus between international developments and domestic passenger aviation competition. This white paper examines the implications of this issue for U.S. consumers. It focuses particularly on the implications of antitrust immunity for U.S. consumers that travel on nonstop and connecting international itineraries that utilize U.S. alliance gateways (i.e., hubs). Many of these gateways have become significantly more concentrated as the result of sweeping U.S. airline consolidation over the past decade, raising concerns about foreclosure of smaller, non-allied carriers and higher fares, less choice in carriers, and lower quality for consumers. Such changes undercut claims that immunity can bring substantial benefits to consumers in nonstop and in the behind-the-gateway and beyond-the-gateway markets served by the alliances.

The paper proceeds in several parts. It begins with a review of alliance growth over the past 25 years, the growing dominance of U.S. carriers in the alliances, and the accumulation of immunity over time. The analysis then moves to discuss the policy concerns that generally surround antitrust immunity and exemptions, how DOT handles immunity, and the shift in economic evidence regarding the costs and benefits of ATI. The last section addresses growing competitive concerns over immunity for U.S. consumers. It provides a two-pronged analysis that provides some insight into why immunity policy should consider the fundamental changes in U.S. aviation markets in order to protect U.S. consumers. The white paper concludes with suggestions and recommendations that might guide future policy.

April 17, 2019 | Permalink | Comments (0)

Tuesday, April 16, 2019

A Lion King Passover


This is really worth watching.


April 16, 2019 | Permalink | Comments (0)

Singapore's Competition Regime and its Objectives: The Case Against Formalism

Kenneth Khoo, National University of Singapore (NUS) - Faculty of Law and Allen Sng describe Singapore's Competition Regime and its Objectives: The Case Against Formalism.

ABSTRACT: On 1 April 2018, the Competition Commission of Singapore was renamed – it is now the Consumer and Competition Commission of Singapore. Notwithstanding this renaming, however, a clear consensus on the underlying objectives of Singapore’s Competition Policy remains elusive. In this article, we put forth a normative case for why Singapore’s competition authorities should prioritise the promotion of economic welfare over competing objectives, as opposed to a more pluralistic approach that pursues multiple objectives of equal standing. We argue that many of the substantive rules in contemporary EU Competition Law are informed by non-efficiency objectives that are unique to the EU context, and may not be suitable for direct importation into Singapore. In particular, we illustrate how the heavy reliance on EU caselaw as persuasive authority has resulted in what antitrust scholars have termed a “formalistic” approach to Competition Law – liability is often established pursuant to presumptions of law that allow the authorities to infer liability upon proof of certain conduct. The “formalistic” approach stands in contrast to its “effects-based” counterpart, where the authorities are required to establish actual anti-competitive effects in the relevant market. We show how the “formalistic” nature of EU Competition Law may be unsuitable for Singapore’s competition regime in light of the normative framework expounded above. Henceforth, we suggest that antitrust authorities in Singapore should exercise considerable caution in endorsing the application of EU law in individual cases.

April 16, 2019 | Permalink | Comments (0)

Network effects at retail payments market: evidence from Russian merchants

By: Egor Krivosheya (Moscow school of management SKOLKOVO, National Research University Higher School of Economics, Russian Federation)
Abstract: This research examines the role of network externalities in card acceptance by merchants on the retail payments market in Russia. The work empirically tests the effects of both direct and indirect network externalities for the merchants? card acceptance probability based on the representative survey of 800 traditional (offline) merchants from all Russian regions. The main finding of this study is that the probability of cashless payments acceptance by merchants increases with the presence of direct and indirect or both types of network externalities, controlling for a large set of control variables, including merchants? characteristics and location-specific differences between the retailers. The results are robust to the changes in measures of network externalities and inclusion of shadow economy controls. The findings are significant both statistically and economically.
Keywords: Retail payments; payment cards; network effects; merchants' acceptance; financial services
JEL: G21 E42
Date: 2018–10

April 16, 2019 | Permalink | Comments (0)

Platforms, American Express, and the Problem of Complexity in Antitrust

Chris Sagers, Cleveland State addresses Platforms, American Express, and the Problem of Complexity in Antitrust.

ABSTRACT: Something old and important is lost sight of in a case like Ohio v. American Express, the Supreme Court's recent adoption of "platform" or "two-sided market" theory in American antitrust, and in theoretical efforts like the one on which it is based. A rarely discussed idea built in to American antitrust is that, as far as the law is concerned, markets are all pretty much the same. I explain why that seemingly prosaic fundamentalism in fact serves key instrumental goals, and why neglect of them is largely responsible for the failure of modern antitrust. I show the serious consequences of that mistake by asking whether anything was preserved by the "anti-steering" rules protected in the Amex case that justify making them so hard to challenge. I further ask what the broader consequences may be of letting the cat of out-of-network effects out of the bag of static, partial equilibria.

April 16, 2019 | Permalink | Comments (0)

Substitution Between Online Distribution Channels: Evidence from the Oslo Hotel Market

By: Cazaubiel, Arthur (CREST, ENSAE ParisTech); Cure, Morgane (CREST, ENSAE ParisTech); Johansen, Bjørn Olav (University of Bergen, Department of Economics); Vergé, Thibaud (CREST, ENSAE ParisTech and University of Bergen, Department of Economics)
Abstract: Using an exhaustive database of bookings in one large chain of hotels active in Oslo (2013-2016), we estimate a nested-logit demand model that allows us to evaluate substitution patterns between online distribution channels. Making use of the chains’ decision to delist from Expedia’s platform, we can then compare simulated and actual effects of such an event on prices and market shares and identify ways to improve on simulated counterfactual outcomes.
Keywords: Multi-channel distribution; Pricing; Structural demand estimation; Online substitution
JEL: D22 D43 L11 L81
Date: 2018–08–01

April 16, 2019 | Permalink | Comments (0)

Monday, April 15, 2019

Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets

By: Gugler, KlausHeim, SvenJanssen, MaartenLiebensteiner, Mario
Abstract: We study how consumer search affects pricing in markets with incumbents and entrants using panel data on German electricity retail markets. Consumers observe the baseline price of the incumbent and decide whether or not to search. Incumbent providers can price discriminate between searching and loyal consumers. Empirically we show that local incumbents increase their baseline rate while entrants decrease their tariffs if consumer search increases. Moreover, the incumbent price discriminates more strongly in markets with more consumer search. Using a theoretical model, we show that these pricing patterns are consistent with the strategic interaction of profit-maximizing firms.
Keywords: electricity; price discrimination; price dispersion; search
JEL: D43 D83 L11 L13 Q40
Date: 2018–09

April 15, 2019 | Permalink | Comments (0)

Bargaining Power between Food Processors and Retailers: Evidence from Japanese Milk Transactions

By: Hayashida, K.
Abstract: Since the 1990s, several studies have pointed out that Japanese retailers exert buyer power over upstream firms in milk transactions (the buyer power hypothesis), despite the high level of competition between supermarkets and between milk suppliers. The conventional new empirical industrial organization approach, which assumes price-taking behavior on either side of players, is not appropriate for this market. Instead, we use the bilateral Nash bargaining model. Using purchase data for the period June 2012--December 2014, we estimate a structural bargaining model for each market in order to identify the relative bargaining strength of the respective agents. The results show that retailers tend to have stronger bargaining power than processors, even in the case of low market concentration. Therefore, these results support the buyer power hypothesis for wholesale milk transactions. In addition, we show the local small and medium-sized supermarkets have moderate bargaining power in the case of NB milk, whereas top-share supermarkets, discounters, and drugstores attempt almost take-it-or-leave-it offers. Finally, we identify the regional differences in the bargaining power of each brand and retailer, highlighting the differences for COOP milk in each region and in the market strategies of large supermarkets. Acknowledgement : I am grateful to Nao Koike for his kindness in providing me with the data used in this study. I would also like to thank Nobuhiro Suzuki for his support, and Takeshi Sato for his critical reviews of the first draft of this paper. Any errors or omissions are author's responsibility.
Keywords: Agricultural and Food Policy
Date: 2018–07

April 15, 2019 | Permalink | Comments (0)

Seemingly Exploitative Contracts

By: Pei-Cheng Yu (School of Economics, UNSW Business School, UNSW Sydney)
Abstract: This paper studies sequential price discrimination of sophisticated present-biased consumers in the credit market. The optimal contract utilizes present bias to improve screening by inducing certain consumers to over-consume and over-accumulate debt without the presence of naivete. This shows that the optimal contract can have seemingly exploitative features that cause certain consumers to experience ex-post welfare losses even when they are sophisticated. This has important policy implications. If the intention of firms is to screen and not exploit consumers, then financial regulations aimed at protecting consumers by eliminating seemingly exploitative features could introduce additional distortions. I also analyze the optimal contract for naive consumers. The main difference between contracts for sophisticated and naıve consumers is the lack of a commitment mechanism in exploitative contracts, while the presence of teaser rates, late fees or overdraft fees does not necessarily make contracts exploitative.
Keywords: Credit contract, Financial regulations, Non-linear pricing, Present bias, Sequential screening
JEL: D18 D82 D86 G28
Date: 2018–10

April 15, 2019 | Permalink | Comments (0)

Cartel Sentencing in Ireland: Criminal Standards of Proof, But Civil Sanctions

By: Gorecki, Paul
Abstract: On 20 June 2018 the Court of Appeal in Ireland’s first bid-rigging case determined that the €7,500 fine imposed by the lower court on a corporate officer was unduly lenient. It was increased to €45,000. The €10,000 fine on the undertaking was not varied. The effect of the Court’s judgment, if followed in future cartel cases, is that for cartels in Ireland the criminal standard of proof remains, but the only sanction is a fine, what in many EU jurisdictions is regarded as a civil sanction. No gaol sentence was imposed and no justification provided. This is likely to undermine the effectiveness of the Cartel Immunity Programme, a vital tool for cartel detection and prosecution. Fines based on the cartel induced price rise are not only seriously underestimated by the Court, by a factor of around five, but imposed on the wrong target (i.e. the corporate officer not the undertaking). Ignorance as a defence has been revived. Victims are blamed. Bid-rigging cartels appear – unjustifiably - to be of lesser importance than other types of hard core cartels. Major arguments made by the Director of Public Prosecutions in the appeal were simply ignored by the Court with no explanation offered. The prospect for competition law enforcement in Ireland is grim, particularly with respect to bid-rigging cartels which the Competition and Consumer Protection Commission has made an enforcement priority.
Keywords: Bid-rigging cartel; commercial flooring; Competition Act 2002; unduly lenient; sentencing competition law; cartels.
JEL: D43 K21 L13 L41
Date: 2018–11–01

April 15, 2019 | Permalink | Comments (0)

Friday, April 12, 2019

Assistant Attorney General Makan Delrahim Delivers Opening Remarks at Roundtable Discussing the Antitrust Criminal Penalty Enhancement & Reform Act Washington, DC ~ Thursday, April 11, 2019

His speech is here.

April 12, 2019 | Permalink | Comments (0)

When is Double Marginalization a Problem?

By: Staahl Gabrielsen, Tommy (University of Bergen, Department of Economics); Johansen, Bjørn Olav (University of Bergen, Department of Economics); Shaffer, Greg (University of Rochester)
Abstract: Double marginalization refers to the distortion caused by the successive markups of independent firms in a distribution channel. The implication that this both reduces firm profits and harms consumers is known as the double-marginalization problem. Many solutions have been proposed to help sellers mitigate this pricing problem, and it is arguably one of the main reasons why quantity discounts in the distribution channel are as prevalent as they are. Surprisingly, however, the implication that end-user prices will be distorted upward has only been shown under a very restrictive set of circumstances (successive monopoly). Whether and under what conditions double marginalization is a problem in other, more realistic settings is generally unknown. In this paper, we show that double marginalization need not be a problem when an upstream firm sells its product through competing intermediaries and shelf space is costly. When this is the case, we find that there will often be a role for slotting fees, minimum resale price maintenance (min RPM), and minimum advertised pricing (MAP) policies.
Keywords: slotting fees; resale price maintenance; distribution channels
JEL: L11 L42
Date: 2018–08–31

April 12, 2019 | Permalink | Comments (0)

Pricing algorithms in oligopoly: theory and antitrust implications

By: Jacques THEPOT (LaRGE Research Center, Université de Strasbourg)
Abstract: Pricing algorithms are computerized procedures that a seller may use to adapt instantaneously its price to market conditions, including to prices quoted by its rivals. These algorithms are related to the extensive use of web-collectors which contribute in many industries to identifying the best price. In such settings, price competition operates between algorithms, no longer between executives of brick and mortar companies. In this context, the question is to know whether economic efficiency is achieved as implicit forms of collusion may arise between the sellers. This paper is aimed at discussing this conceptual issue in a price-setting homogeneous product oligopoly with decreasing returns to scale where algorithms implement downward and upward matching policies. Using fixed point argument akin to general equilibrium theory, we find a multiplicity of equilibria with prices located between collusion and Cournot, if matching is allowed upward and downward. When matching operates only for price undercutting, this multiplicity is extended up to a bottom value of the market price, close to the competitive price. This bypasses the Bertrand-Edgeworth paradox. As a result, pricing algorithms may contribute to the stability of the market and also to welfare improvement.
Keywords: oligopoly, antitrust law, cost structure.
JEL: K21 L13 L41
Date: 2018

April 12, 2019 | Permalink | Comments (0)

Effects of Market Structure and Patient Choice on Hospital Quality for Planned Patients

By: Giuseppe Moscelli (University of Surrey); Hugh Gravelle (University of York); Luigi Siciliani (University of York)
Abstract: We investigate the change in the effect of market structure on planned hospital quality for three high-volume treatments, using a quasi difference-in-differences approach based on the relaxation of patient constraints on hospital choice in England. We employ control functions to allow for time-varying endogeneity from unobserved patient characteristics. We find that the choice reforms reduced quality for hip and knee replacement but not for coronary bypass, This is likely due to hospitals making a larger loss on hip and knee replacements, since robustness checks rule out changes in length of stay, new competitors’ entry and hospital-level mortality as possible confounders.
JEL: H51 I11 I18 L32 L33
Date: 2018–10

April 12, 2019 | Permalink | Comments (0)

Thursday, April 11, 2019

Dynamic Pricing of Credit Cards and the Effects of Regulation

By: Hong, Suting (Shanghai Tech University); Hunt, Robert M. (Federal Reserve Bank of Philadelphia); Serfes, Konstantinos (Drexel University)
Abstract: We construct a two-period model of revolving credit with asymmetric information and adverse selection.In the second period, lenders exploit an informational advantage with respect to their own customers. Those rents stimulate competition for customers in the first period. The informational advantage the current lender enjoys relative to its competitors determines interest rates, credit supply, and switching behavior. We evaluate the consequences of limiting the repricing of existing balances as implemented by recent legislation. Such restrictions increase deadweight losses and reduce ex ante consumer surplus. The model suggests novel approaches to identify empirically the effects of this law.
Keywords: Financial contracts; Credit Card Accountability Responsibility and Disclosure Act; holdup; risk-based pricing; credit supply
JEL: D14 D18 D86 G28 K12
Date: 2018–11–07

April 11, 2019 | Permalink | Comments (0)

Steering Incentives and Bundling Practices in the Telecommunications Industry

By: Brian McManus (University of North Carolina at Chapel Hill); Aviv Nevo(University of Pennsylvania); Zachary Nolan (Duke University); Jonathan W. Williams (University of North Carolina at Chapel Hill)
Abstract: We model mixed-bundle pricing by internet service providers (ISPs) to study their incentive to steer consumers across different subscription options and influence usage decisions. Using unique panel data from an ISP, we test predictions from the model. We find that the ISP's introduction of internet usage allowances and overage charges steered internet-only consumers into bundled TV and internet subscriptions; this effect was greatest for heavy users of streaming services most similar to conventional TV. Internet usage growth –- especially in streaming video services –- was curtailed for consumers who added TV subscriptions, and it also fell for consumers who did not upgrade their internet usage allowances. We discuss the implications of these findings for antitrust and regulatory issues in the telecommunications industry.
Keywords: Steering; Bundling; Nonlinear pricing; Telecommunications industry; cord-cutting; broadband
JEL: L11 L13 L96
Date: 2018–10

April 11, 2019 | Permalink | Comments (0)