Tuesday, March 24, 2020

Bidder Collusion: Accounting for All Feasible Bidders

By: Jean-François Richard
Abstract: The Idaho Department of Lands (IDL) sells timber from state lands bymeans of ascending bid auction. In our empirical analysis of all IDL scaleauctions from 2004 through 2015, accounting for all auction-specific feasiblebidders, we find significant evidence of bidder collusion. Given the complexityof the empirical model and the absence of analytic results, we apply the methodof simulated moments to estimate the parameters and Monte Carlo simulationsto produce standard deviations of the estimates. The loss to Idaho from thebidder collusion is estimated to be approximately $43 million over this timeperiod.
URL: http://d.repec.org/n?u=RePEc:pit:wpaper:6759&r=com

March 24, 2020 | Permalink | Comments (0)

Declining Dynamism, Increasing Markups and Missing Growth: The Role of the Labor Force

By: Michael Peters (Yale University); Conor Walsh (Yale University)
Abstract: A growing body of empirical research highlights substantial changes in the US economy during the last three decades. Business dynamism – namely job reallocation, firm entry and creative destruction – is declining. Market power, as measured by markups and industry concentration, seems to be on the rise. Aggregate productivity growth is sluggish. We show that declines in the rate of growth of the labor force can qualitatively account for all of these features in a standard model of firm-dynamics. Despite its richness we can characterize the link between population growth and dynamism, markups and growth analytically. When we calibrate the model to the universe of U.S. Census data, the labor force channel can explain a large fraction of the aggregate trends.
URL: http://d.repec.org/n?u=RePEc:red:sed019:658&r=com

March 24, 2020 | Permalink | Comments (0)

Granular Search, Concentration and Wages

By: Gregor Jarosch (Princeton University); Isaac Sorkin (Stanford University); Jan Sebastian Nimczik (Humboldt University Berlin)
Abstract: This paper develops an approach to measuring labor market power that builds on the structure of a canonical search model. We relax the common assumption of a continuum of firms and assume that firms can commit not to compete with their own future job openings. This granular extension yields a micro-founded concentration index similar to the Herfindahl and a structural mapping between the index and labor market outcomes. Empirically, we define labor markets based on worker flows and then use our framework to quantify the consequences of market power in the Austrian labor market.
URL: http://d.repec.org/n?u=RePEc:red:sed019:1018&r=com

March 24, 2020 | Permalink | Comments (0)

Monday, March 23, 2020

Antitrust's Curse of Bigness Problem

Daniel Sokol, University of Florida, has written on Antitrust's Curse of Bigness Problem.

ABSTRACT: Tim Wu’s most recent book, The Curse of Bigness: Antitrust in the Gilded Age, is an attempt to reframe contemporary antitrust debates by returning antitrust to its more populist roots. Given the global implications of his ideas and policy proposals (including breakup of tech platforms) for many of the large corporations that he takes on, The Curse of Bigness offers profound insights for how society and business should be organized. The first part of this Review summarizes Wu’s major claims. It then highlights some of his critiques as to “bigness,” the multiple goals of antitrust, and the missed opportunities as to cases that should have been or need to be brought, such as against tech companies. Some of Wu’s critiques are spot on in identifying missed opportunities, like a number of horizontal mergers that should have been challenged. Where Wu’s book suffers is where he undervalues the institutional structure of antitrust law, underplays what antitrust does well as a substantive matter, and misanalyzes antitrust and tech platforms.

March 23, 2020 | Permalink | Comments (0)

By: Xintong Han (Concordia University, Department of Economics, 1455 Boulevard de Maisonneuve O, Montreal, QC H3G 1M8, Canada.); Pu Zhao (Boston University, Questrom School of Business, 595 Commonwealth Avenue, Boston, MA 02215, USA.)
Abstract: In this paper, we use unique data from a popular Chinese content provision platform to examine three issues: first, content providers'™ pricing strategies when each follower needs to pay an annual fee for access to content; second, content providers' trade-offs between traffic and referral marketing expenses; and third, the effect of a platform policy on the welfare of content providers and their followers. We use a structural model for a content provider's pricing and referral marketing decisions. The model estimates highlight the link between the referral effectiveness and potential revenue loss. Our counterfactual analysis shows vast difference in communities reactions towards increased platform commissions and potential homogeneity of content provision as well as huge demand loss beyond certain commission thresholds.
URL: http://d.repec.org/n?u=RePEc:net:wpaper:1903&r=com

March 23, 2020 | Permalink | Comments (0)

On financial frictions and firm market power

By: M. CasaresL. DeiddaJ. E. Galdon-Sanchez
Abstract: We build a static general-equilibrium model with monopolistically competitive firms that borrow funds from competitive banks in an economy subject to financial frictions. These frictions are due to non verifiability of both ex post firm returns and managerial effort. Market power has opposing effects. On one side, firms' pricing over marginal cost reduces output compared to perfect competition. On the other, by increasing firms' profitability, market power reduces the impact of financial frictions. The resulting tradeoff is ambiguous. We show that, other things equal, there exists an optimal positive level of market power that maximizes welfare. Such optimal degree of market power increases with moral hazard and decreases with the efficiency of firm liquidation following bankruptcy.
URL: http://d.repec.org/n?u=RePEc:cns:cnscwp:201913&r=com

March 23, 2020 | Permalink | Comments (0)

Markups and Inequality

  1. By: Corina Boar (New York University); Virgiliu Midrigan (New York University)
    Abstract: We study the relationship between markups, firm concentration and inequality using a model of entrepreneurial dynamics in an environment with incomplete markets and borrowing constraints. A key ingredient of the model is that markups are endogenous so that the markup a producer charges depends on the amount of competition it faces. We ask two questions. First, what fraction of the rise in income and wealth inequality is due to changes in the U.S. tax code and decline in anti-trust enforcement that led to a rise in the level and dispersion of markups? Second, what are the consequences of policies aimed at curtailing the market power of firms and reducing the level of markups? We answer these questions by studying micro-level data on income and wealth, entrepreneurial activity and product market concentration through the lens of our model.
    URL: http://d.repec.org/n?u=RePEc:red:sed019:1184&r=com

March 23, 2020 | Permalink | Comments (0)

Too Much Data: Prices and Inefficiencies in Data Markets

By: Daron AcemogluAli MakhdoumiAzarakhsh MalekianAsuman Ozdaglar
Abstract: When a user shares her data with an online platform, she typically reveals relevant information about other users. We model a data market in the presence of this type of externality in a setup where one or multiple platforms estimate a user’s type with data they acquire from all users and (some) users value their privacy. We demonstrate that the data externalities depress the price of data because once a user’s information is leaked by others, she has less reason to protect her data and privacy. These depressed prices lead to excessive data sharing. We characterize conditions under which shutting down data markets improves (utilitarian) welfare. Competition between platforms does not redress the problem of excessively low price for data and too much data sharing, and may further reduce welfare. We propose a scheme based on mediated data-sharing that improves efficiency.
JEL: D62 D83 L86
Date: 2019–09
URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:26296&r=com

March 23, 2020 | Permalink | Comments (0)

Friday, March 20, 2020

Collusion, price dispersion, and fringe competition

By: de Roos, NicolasSmirnov, Vladimir
Abstract: We study the optimal behaviour of a cartel faced with fringe competition and imperfectly attentive consumers. Intertemporal price dispersion obfuscates consumer price comparison which aids the cartel through two channels: it reduces the effectiveness of free riding by the fringe; and it relaxes the cartel’s internal incentive constraints. Our theory explains the survival of a price-setting cartel in a homogeneous product market, provides a collusive rationale for sales and Edgeworth cycles, and characterises the cartel’s manipulation of its fringe rival through a double cut-off rule.
URL: http://d.repec.org/n?u=RePEc:syd:wpaper:2019-13&r=com

March 20, 2020 | Permalink | Comments (0)

Assistant Attorney General Makan Delrahim Delivers Opening Remarks for the Workshop on the Proposed Vertical Merger Guidelines

See here.

March 20, 2020 | Permalink | Comments (0)

Market power in bilateral oligopoly markets with non-expandable infrastructures

By: Yukihiko Funaki (Waseda University); Harold Houba (Vrije Universiteit Amsterdam); Evgenia Motchenkova (Vrije Universiteit Amsterdam)
Abstract: We develop a novel model of price-fee competition in bilateral oligopoly markets with non-expandable infrastructures and costly transportation. The model captures a variety of real market situations and it is the continuous quantity version of the assignment game with indivisible goods on a fixed network. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare at prices equal to marginal costs. Maximal fees and the suppliers' market power are restricted by the buyers' credible threats to switch suppliers. Maximal fees also arise from a negotiation model that extends price competition to price-fee competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but buyers will not be better off. The minimal infrastructure achieving maximal aggregate welfare differs from the minimal network that protects buyers most.
URL: http://d.repec.org/n?u=RePEc:tin:wpaper:20190070&r=com

March 20, 2020 | Permalink | Comments (0)

Mining the Harvard Caselaw Access Project

Felix Chang, University of Cincinnati College of Law, Erin McCabe, Zhaowei Ren, Joshua Beckelhimer, and James Lee identify Mining the Harvard Caselaw Access Project.

ABSTRACT: This Essay illustrates how machine learning can disrupt legal scholarship through the algorithmic extraction and analysis of big data. Specifically, we utilize data from Harvard Law School’s Caselaw Access Project to model how courts tackle two thorny questions in antitrust: the measure of market power and the balance between antitrust and regulation.

March 20, 2020 | Permalink | Comments (0)

Exclusionary Pricing in Two-Sided Markets

Andrea Amelio, European Union - Directorate General for Competition, Liliane Karlinger, European Commission - Directorate General for Competition, and Tommaso Valletti, European Union - European Commissionoffer a DG Comp window into thinking on Exclusionary Pricing in Two-Sided Markets.

ABSTRACT: This paper studies the incentives to engage in exclusionary pricing in the context of two-sided markets. Platforms are horizontally differentiated, and seek to attract users of two groups who single-home and enjoy indirect network externalities from the size of the opposite user group active on the same platform. The entrant incurs a fixed cost of entry, and the incumbent can commit to its prices before the entry decision is taken. The incumbent has thus the option to either accommodate entry, or to exclude entry and enjoy monopolistic profits, albeit under the constraint that its price must be low enough to not leave any room for an entrant to cover its fixed cost of entry. We find that, in the spirit of the literature on limit pricing, under certain circumstances even platforms find it profitable to exclude entrants if the fixed entry cost lies above a certain threshold. By studying the properties of the threshold, we show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude. We also find that entry deterrence is more likely to harm consumers the weaker are network externalities, and the more differentiated are the two platforms.

March 20, 2020 | Permalink | Comments (0)

Thursday, March 19, 2020

On the Meaning of Antitrust's Consumer Welfare Principle

Herb Hovenkamp, Penn provides thoughts On the Meaning of Antitrust's Consumer Welfare Principle.

ABSTRACT: This brief essay addresses the ambiguities in the meaning of “consumer welfare” in antitrust, exploring the differences between the Williamson, Bork, and current understanding of that term. After weighing the alternatives it argues that the consumer welfare principle in antitrust should seek out that state of affairs in which output is maximized, consistent with sustainable competition.

March 19, 2020 | Permalink | Comments (0)

Probability, Presumptions and Evidentiary Burdens in Antitrust Analysis: Revitalizing the Rule of Reason for Exclusionary Conduct

Andy Gavil and Steve Salop describe Probability, Presumptions and Evidentiary Burdens in Antitrust Analysis: Revitalizing the Rule of Reason for Exclusionary Conduct.

ABSTRACT: The conservative critique of antitrust law has been highly influential and has facilitated a transformation of antitrust standards of conduct since the 1970s and led to increasingly more permissive standards of conduct. While these changes have taken many forms, all were influenced by the view that competition law was over-deterrent. Critics relied heavily on the assumption that the durability and costs of false positive errors far exceeded those of false negatives.

Many of the assumptions that guided this retrenchment of antitrust rules were mistaken and advances in the law and in economic analysis have rendered them anachronistic, particularly with respect to exclusionary conduct. Continued reliance on what are now exaggerated fears of “false positives,” and failure adequately to consider the harm from “false negatives,” has led courts to impose excessive demands of proof on plaintiffs that belie both established procedural norms and sound economic analysis. The result is not better and more reasonable antitrust standards, but instead an embedded ideological preference for non-intervention that creates a tendency toward false negatives, particularly in modern markets characterized by economies of scale and network effects.

In this article, we explain how these erroneous assumptions about markets, institutions, and conduct have distorted the antitrust decision-making process and produced an excessive risk of false negatives in exclusionary conduct cases involving firms attempting to achieve, maintain, or enhance dominance or substantial market power. To redress this imbalance, we integrate modern economic analysis and the teaching of decision theory with the foundational conventions of antitrust law, which has long relied on probability, presumptions, and reasonable inferences to provide more effective means for evaluating competitive effects and resolving antitrust claims.

March 19, 2020 | Permalink | Comments (0)

Platform Competition with Multi-Homing on Both Sides: Subsidize or Not?

Yannis Bakos, New York University (NYU) - Department of Information, Operations, and Management Sciences and Hanna Halaburda, New York University (NYU) - Leonard N. Stern School of Business ask Platform Competition with Multi-Homing on Both Sides: Subsidize or Not?

ABSTRACT: A major result in the study of two-sided platforms is the strategic interdependence between the two sides of the same platform, leading to the implication that a platform can maximize its total profits by subsidizing one of its sides. We show that this result largely depends on assuming that at least one side of the market single-homes. As technology makes joining multiple platforms easier, we increasingly observe that participants on both sides of two-sided platforms multi-home. The case of multi-homing on both sides is mostly ignored in the literature on competition between two-sided platforms. We help fill this gap by developing a model for platform competition in a differentiated setting (a Hoteling line), which is similar to other models in the literature but focuses on the case where at least some agents on each side multi-home. We show that when both sides in a platform market multi-home, the strategic interdependence between the two sides of the same platform will diminish or even disappear. Our analysis suggests that the common strategic advice to subsidize one side in order to maximize total profits may be limited or even incorrect when both sides multi-home, which is an important caveat given the increasing prevalence of multi-homing in platform markets.

March 19, 2020 | Permalink | Comments (0)

The Application of Current Antitrust Law to Explicit Collusion by Autonomously Acting Pricing Algorithms

Ina Fey, Norton Rose Fulbright describes The Application of Current Antitrust Law to Explicit Collusion by Autonomously Acting Pricing Algorithms.

ABSTRACT:

This paper aims to answer the question whether the current (EU) antitrust law is well-equipped to deal with explicit collusion by pricing algorithms that act independently from the companies using them. The paper unfolds in three main parts: first, it outlines the exact circumstances of the later discussed scenario and the differentiation to other ways in which algorithms can be related to infringements of antitrust law. Then it investigates whether the use of algorithms specified in the first part falls under the scope of antitrust law in general, that is whether the term 'agreement' according to Art. 101 (1) TFEU is applicable to independently acting algorithms or whether any other tool of current antitrust law (here: concerted practices) enables for the application of Art. 101 (1) TFEU to algorithmic price-setting. Finally, it assesses if the company using the algorithm can be held responsible for any breach of antitrust law that the algorithm is engaged in. It does so by applying the concept of attribution of liability for acts of employees to the employing firm. My hypothesis is that there is no fundamental difference between the conduct of deep learning algorithms and human employees and that as a result the same principles of attribution of liability to firms can be applied.

March 19, 2020 | Permalink | Comments (0)

Wednesday, March 18, 2020

The Nutanix judgment—practical implications for competition law in Hong Kong

Natalie Yeung explores The Nutanix judgment—practical implications for competition law in Hong Kong.

ABSTRACT: The Hong Kong Competition Tribunal (‘Tribunal’) handed down two landmark judgments in May 2019. As the first substantive competition law enforcement decisions since the Competition came into full effect in December 2015, these decisions laid the foundations for future competition law enforcement in Hong Kong and paved the way for legal interpretation of some key provisions of the Competition Ordinance.

March 18, 2020 | Permalink | Comments (0)

Unlocking Platform Technology to Combat Health Pandemics

Anindya Ghose (NYU Stern School of Business) and I have a new post Unlocking Platform Technology to Combat Health Pandemics”.  It appears on “Notice & Comment” - A blog from the Yale Journal on Regulation and ABA Section of Administrative Law & Regulatory Practice. 

Please share it with people in public health.

Everyone who has Location History enabled can see their own timeline. On desktop, go to maps.google.com, then click on the hamburger menu in upper left corner and then on "your timeline". If a government agency posted a definitive map of outbreaks, then you could compare your timeline to those outbreaks. If you don't have it enabled, enable it for future use.  See this app.

March 18, 2020 | Permalink | Comments (0)

No magic dust: The relationship between the national and local assessments in Sainsbury’s/Asda

Jenny Haydock and Tom Smith discuss No magic dust: The relationship between the national and local assessments in Sainsbury’s/Asda.

ABSTRACT: We consider the Competition and Markets Authority (CMA) investigation into the proposed merger of UK grocery and fuel retailers Sainsbury’s and Asda. The CMA prohibited the merger in April 2019, based on a finding of widespread competition concerns. In this article we examine in particular the CMA’s assessments of the proposed merger’s effects on the merging parties’ unilateral incentives to worsen their offering across their businesses—for example, by raising supermarket product prices nationwide.

We note that the CMA’s concerns on a national basis arose exclusively from the aggregation of the competitive impacts in individual local areas. We consider to what extent this is likely to be the case in other mergers with somewhat similar features. We also consider under what circumstances an assessment of national-level concerns is necessary when the relevant geographic markets have been defined as local. We address the relationship between the CMA’s national-level analysis and its assessments of the merging parties’ incentives to worsen their offerings at specific stores. Finally, we discuss the ways in which the CMA’s national-level concerns affected its analysis of possible remedies.

March 18, 2020 | Permalink | Comments (0)