Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, April 30, 2020

Summer 2020 Antitrust Zoom Workshop Series

The University of Florida Levin College of Law, University of Florida Competition Policy Initiative and University of Florida Digital Markets Initiative present

Summer 2020 Zoom Antitrust Law Workshop Series

All times are Thursday, 12pm EST. The series is open to faculty and graduate students and none of the workshops will be recorded. Feel free to share details with others who might be interested in attending. Abstract and slides or paper will be sent out the week of the presentation.  If you would like to join the mailing list, email here.

 

May 7                   Scott Hemphill (NYU) & Tim Wu (Columbia) 

May 14                 Daniel Sokol (Florida) 

May 21                 Louis Kaplow (Harvard)

May 28                 Rebecca Allensworth (Vaderbilt)

June 4                   Abe Wickelgren (Texas)

June 11                 Eleanor Fox (NYU)

June 18                 Barak Orbach (Arizona)

June 25                 Christopher Leslie (UC Irvine)

July 2                     Erik Hovenkamp (USC) & Steve Salop (Georgetown)

July 9                     Dan Crane (Michigan)

July 16                   Bill Kovacic (George Washington)

July 23                   Alan Meese (William & Mary)

July 30                   Hiba Hafiz (Boston College)

August 6               Spencer Waller (Chicago Loyola)

April 30, 2020 | Permalink | Comments (0)

Wednesday, April 29, 2020

Monopsony in Spatial Equilibrium

By: Kahn, Matthew E. (Johns Hopkins University); Tracy, Joseph (Federal Reserve Bank of Dallas)
Abstract: An emerging labor economics literature studies the consequences of firms exercising market power in local labor markets. These monopsony models have implications for trends in earnings inequality. The extent of this market power is likely to vary across local labor markets. In choosing what market to live and work in, workers trade off wages, rents and local amenities. Building on the Rosen/Roback spatial equilibrium model, we investigate how the existence of local monopsony power affects the cross-sectional spatial distribution of wages and rents across cities. We find an employment-weighted elasticity of land prices to concentration of –0.034—similar to Rinz (2018)’s reported elasticity of compensation to concentration. This finding has implications for who bears the economic incidence of labor market power. We present two extensions of the model focusing on the role of migration costs and worker skill heterogeneity.
Keywords: monopsony; wages; housing costs
JEL: J3 R23
Date: 2019–10–15
URL: http://d.repec.org/n?u=RePEc:fip:feddwp:1912&r=com

April 29, 2020 | Permalink | Comments (0)

Market Power and Cost Efficiency in the African Banking Industry

By: Simplice A. Asongu (Yaoundé/Cameroon); Rexon T. Nting (London, UK); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
Abstract: Purpose- In this study, we test the so-called ‘Quiet Life Hypothesis’ (QLH) which postulates that banks with market power are less efficient. Design/methodology/approach- We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001-2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity. Findings- The empirical evidence does not support the QLH because market power is positively associated with cost efficiency. Originality/value- Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.
Keywords: Finance; Savings banks; Competition; Efficiency; Quiet life hypothesis
JEL: E42 E52 E58 G21 G28
Date: 2019–01
URL: http://d.repec.org/n?u=RePEc:agd:wpaper:19/080&r=com

April 29, 2020 | Permalink | Comments (0)

Richard Whish QC (Hon) Liber Amicorum

The tribute book is now out.

With contributions from Avinash AmanarthAndrea AppellaDavid BaileyRachel BrandenburgerPaul CastloCarter ChimManish DasKyriakos FountoukakosPeter FreemanMara GhiorghiesMassimiliano KadarŠarūnas KeserauskasIlkka LeppihalmeMunesh MahtaniAdrian MajumdarNorman ManoimSamantha MobleyMatteo MontecchiOkeoghene OduduBurton OngHarikumar PillayLip Hang PohAnne RileyVivien RosePeter RothMiguel Sousa FerroHan Li TohPablo TrevisánAndrea UsaiIestyn Williams and Mario Ybar.

Richard deserves tremendous credit for building out the competition law program at Kings College, which remains the top global program for education and also has a strong set of scholars.

April 29, 2020 | Permalink | Comments (0)

Impact of mobile operators consolidation on unitary price

Impact of mobile operators consolidation on unitary price

By: Aimene, LouiseJeanjean, FrancoisLiang, Julienne
Abstract: We evaluate the impact of mobile operators merger on unitary price of data and voice by using country-level observations on data retail revenue, cellular data traffic, voice retail revenue, outgoing voice minutes. Using difference-in-differences estimation strategy, we estimate the effect of 4-to-3 operators merger by comparing the difference between the no-merging countries and the merging countries before and after the introduction of 4-to-3 operators merger. In accordance with the theoretical prediction provided in this paper, we find that mergers from four to three mobile operators tend to decrease data unitary price and increase voice unitary price
URL: http://d.repec.org/n?u=RePEc:zbw:itse19:205161&r=com

April 29, 2020 | Permalink | Comments (0)

Delivery in the city: evidence on monopolistic competition from New York restaurants

By: Cosman, JacobSchiff, Nathan
Abstract: We examine the response to entry in a large market with differentiated products using a novel longitudinal dataset of over 550,000 New York City restaurant menus from 68 consecutive weeks. We compare “treated” restaurants facing a nearby entrant to “control” restaurants with no new competition, matching restaurants using location characteristics and a pairwise distance measure based on menu text. Restaurants frequently adjust prices and product offerings, but we find no evidence that they respond differentially to new competition. However, restaurants in the top entry decile are 5% more likely to exit after a year than restaurants in the lowest entry decile.

April 29, 2020 | Permalink | Comments (0)

Tuesday, April 28, 2020

Proposed Merger Ban Doesn't Make Sense, FTC Commissioner Says

Commissioner Phillips on Bloomberg (and he is right)

 

 

 

April 28, 2020 | Permalink | Comments (0)

Does the Provision of Physician Services Respond to Competition?

By: Philippe CHONÉ (Centre for Research in Economics and Statistics (CREST).); Elise COUDIN (Centre for Research in Economics and Statistics and Institut National de la Statistique et des Etudes Economiques (INSEE).); Anne PLA (Ministry for Solidarity and Health, Direction de la Recherche, des Etudes, de l’Evaluation et des Statistiques.)
Abstract: We assess the extent to which specialist physicians respond to local competition when deciding how much services to provide under a fee-for-service payment system. We use an exhaustive administrative panel data set of French physicians, and account for the dual nature of the regulatory environment, with part of the physicians being subject to price regulation. The activity of fee-regulated physicians depends only on their individual preferences, and is not affected by changes in their demand or competitive environment. By contrast, the prices charged by free-billing physicians decrease and their activity increases with physician density. Reaction functions are upward-slopping, with the quantities of services provided being strategic complements. Our findings are consistent with a static oligopoly model where the consumption-leisure preferences of doctors exhibit strong income effects.
URL: http://d.repec.org/n?u=RePEc:crs:wpaper:2019-20&r=com

April 28, 2020 | Permalink | Comments (0)

Competition on Unobserved Attributes: The Case of the Hospital Industry

By: Philippe CHONÉ (Centre for Research in Economics and Statistics (CREST).); Lionel WILNER (INSEE-CREST.)
Abstract: To assess strategic interactions in industries where endogenous product characteristics are unobserved to the researcher, we propose an empirical method that brings a competition-in-utility-space framework to the data. We apply the method to the French hospital industry. The utilities offered to patients are inferred from local market shares under AKM exclusion restrictions. The hospitals' objective functions are identified thanks to the gradual introduction of stronger financial incentives over the period of study. Offering more utility to each patient entails incurring higher costs per patient, implying that utilities are mostly strategic complements. Counterfactual simulations show that stronger incentives affect market shares but have little impact on the total number of patient admissions. We quantify the resulting gains for patients and losses for hospitals.
URL: http://d.repec.org/n?u=RePEc:crs:wpaper:2019-21&r=com

April 28, 2020 | Permalink | Comments (0)

Tying in evolving industries, when future entry cannot be deterred

By: Chiara FumagalliMassimo Motta
Abstract: We show that the incentive to engage in exclusionary tying (of two complementary products) may arise even when tying cannot be used as a defensive strategy to protect the incumbent's dominant position in the primary market. By engaging in tying, an incumbent firm sacrifices current profits but can exclude a more efficient rival from a complementary market by depriving it of the critical scale it needs to be successful. In turn, exclusion in the complementary market allows the incumbent to be in a favorable position when a more efficient rival will enter the primary market, and to appropriate some of the rival's efficiency rents. The paper also shows that tying is a more profitable exclusionary strategy than pure bundling, and that exclusion is the less likely the higher the proportion of consumers who multi-home.
Date: 2019
URL: http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp19123&r=com

April 28, 2020 | Permalink | Comments (0)

Monday, April 27, 2020

Optimal dynamic antitrust fines

By: Merino Troncoso, Carlos
Abstract: Standard antitrust optimal fines rely on a microeconomic static model. Motchenkova describes optimal antitrust dynamic sanctions and their application for EU and US methodology. For the EU fine, and based on this methodology, we find an equilibrium point for a high level of offense (2 times normal profits ) and a high detection probability (0.6).
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:96781&r=com

April 27, 2020 | Permalink | Comments (0)

Statement from Assistant Attorney General Makan Delrahim on the 20th Anniversary of World Intellectual Property Day

Market collusion with joint harm and liability sharing

By: Andreea Cosnita-LanglaisMaxime CharreireFlorian Baumann
Abstract: When it is impossible to identify ex post the producer of a product causing harm or the damage caused is indivisible although caused by multiple injurers, courts must apportion the total damage among tortfeasors. In this model we examine how such liability sharing rules affect the likelhood of tacit collusion. For this we use a standard Cournot oligopoly model where firms are collectively held liable for joint harm inflicted on third parties. The damage caused may be either linear or cumulative in total industry output. With repeated market interaction and grim strategies, we investigate the sustainability of collusion to derive some policy implications.
URL: http://d.repec.org/n?u=RePEc:drm:wpaper:2019-21&r=com

April 27, 2020 | Permalink | Comments (0)

Strategic Reneging in Sequential Imperfect Markets

By: David BENATIA (CREST (UMR 9194), ENSAE, Institut Polytechnique de Paris.); Etienne BILLETTE de VILLEMEUR (LEM-CNRS (UMR 9221), Université de Lille.)
Abstract: This paper investigates the incentives to manipulate sequential markets by strategically reneging on forward commitments. We first study the behavior of a monopolist in a two-period model with demand uncertainty. Our results deliver guidance for identifying manipulations and evaluating its market impacts. We then test the model's predictions using occurrences of reneging on long-term commitments in Alberta's electricity market. We implement a machine learning approach to identify and evaluate manipulations. We find that a dominant supplier increased its revenues by $35 million during the winter of 2010-11, causing Alberta's electricity procurement costs to increase by above $330 million (20%).
URL: http://d.repec.org/n?u=RePEc:crs:wpaper:2019-19&r=com

April 27, 2020 | Permalink | Comments (0)

Zero-Rating and Network Effects

By: Hoernig, SteffenMonteiro, Francisco
Abstract: We consider internet service providers' incentives to zero-rate, i.e. do not count towards data allowances, the consumption of certain services, in the absence of payments from content providers. In a general model with various types of network effects, service substitutes or complements, monopoly and duopoly, we show that ISPs adopt zero-rating and that it increases consumer surplus and total welfare if network effects are strong enough. Capacity investment increases (decreases) with network effects if services are complements (substitutes). Under competition, the decision to zero-rate depends the residual network effect, which includes the impacts of spillovers and brand differentiation.
URL: http://d.repec.org/n?u=RePEc:zbw:itse19:205182&r=com

April 27, 2020 | Permalink | Comments (0)

Friday, April 24, 2020

DISPENSING WITH INDISPENSABILITY

Niamh Dunne is DISPENSING WITH INDISPENSABILITY.

ABSTRACT: ‘Indispensability’ is the central concept underpinning the treatment of refusal to deal claims under Article 102 TFEU. Since its adoption in Magill and Bronner, however, the conventional wisdom that instances of refusal to deal constitute an abuse only in the presence of indispensability has been challenged from multiple directions. This article surveys the departures from the orthodoxy that can be found in the jurisprudence. In doing so, it measures the purported explanations for such derogations against the justifications for restraint encapsulated in the indispensability concept. Finally, it asks whether the weight of exceptions may reach the point of overwhelming, or ‘dispensing with,’ the original rule.

April 24, 2020 | Permalink | Comments (0)

The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports

By: Philippe AghionAntonin BergeaudMatthieu LequienMarc Melitz
Abstract: We analyze how demand conditions faced by a firm impacts its innovation decisions. To disentangle the direction of causality between innovation and demand conditions, we construct a firm-level export demand shock which responds to aggregate conditions in a firm's export destinations but is exogenous to firm-level decisions. Using exhaustive data covering the French manufacturing sector, we show that French firms respond to exogenous growth shocks in their export destinations by patenting more; and that this response is entirely driven by the subset of initially more productive firms. The patent response arises 3 to 5 years after a demand shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show that this finding of a skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms.
URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1657&r=com

April 24, 2020 | Permalink | Comments (0)

Bank Competition, Cost of Credit and Economic Activity: evidence from Brazil

By: Gustavo JoaquimBernardus Van Doornik
Abstract: We estimate the effect of bank competition on financial and real variables. To do so, we use regional heterogeneous exposure to mergers and acquisitions (M&A) of large banks as an instrument for changes in competition of local banking markets in Brazil. We use detailed administrative data on loans and firms and a difference-in-differences empirical strategy that compares changes in outcomes for markets affected or not by the M&A episodes. We find that, following M&A episodes, spreads increase and lending decreases persistently in exposed markets relative to controls. We show that this is larger for more concentrated markets at the time of the M&A episode, and is unlikely to be driven by other factors, such as branch closures. We find that non-agricultural employment falls .2% for an increase of 1% in spreads. We develop a model of heterogeneous firms and concentration in the banking sector that is consistent with the micro evidence. In our model, the semi-elasticity of credit to lending rates is a sufficient statistic for the effect of concentration on output, which we estimate to be -3.17. Among other counterfactuals, we show that if Brazilian spreads fell to world levels, output would increase by approximately 5%.
URL: http://d.repec.org/n?u=RePEc:bcb:wpaper:508&r=com

April 24, 2020 | Permalink | Comments (0)

Thursday, April 23, 2020

  1. By: Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics)
    Abstract: We show that the incentive to engage in exclusionary tying (of two complementary products) may arise even when tying cannot be used as a defensive strategy to protect the incumbent's dominant position in the primary market. By engaging in tying, an incumbent firm sacrifices current profits but can exclude a more efficient rival from a complementary market by depriving it of the critical scale it needs to be successful. In turn, exclusion in the complementary market allows the incumbent to be in a favorable position when a more efficient rival will enter the primary market, and to appropriate some of the rival's efficiency rents. The paper also shows that tying is a more profitable exclusionary strategy than pure bundling, and that exclusion is the less likely the higher the proportion of consumers who multi-home.
    URL: http://d.repec.org/n?u=RePEc:sef:csefwp:548&r=com

April 23, 2020 | Permalink | Comments (0)

Corrupting Cartels: An Overview of the Petrobras Case

By: Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Barbosa, Kleno (Stockholm Institute of Transition Economics)
Abstract: This paper provides an overview of the corruption case and the connected cartels that affected one of the biggest Brazilian state-owned companies, Petrobras, and the highly controversial ‘Operation Car Wash’. We focus on the behavior of cartel members and study the size of the contracts affected or potentially affected by the illegal activity, comparing them with comparable sets of contracts selected with three different matching approaches.
URL: http://d.repec.org/n?u=RePEc:hhs:hasite:0051&r=com

April 23, 2020 | Permalink | Comments (0)