Wednesday, August 4, 2021
This week for the Cambridge-USC virtual antitrust series we have Angela Zhang (Hong Kong University, Associate Professor of Law, Director of Center for Chinese Law ) presenting “Agility Over Stability: China’s Great Reversal in Regulating the Platform Economy”.
If you are an antitrust academic or practitioner and would like to join the workshop series, please contact me.
In this brief essay I discuss the reasons why, in my experience, the judicial review of competition decisions by the European Commission is unlikely to correct the costly Type I errors (or false positives) that with some probability characterise the Commission’s decisions. This is of particular significance nowadays given that everything indicates that competition agencies are likely increase their enforcement efforts convinced that so far they have been too lenient or, if you prefer, they have paid too much attention to minimising Type I errors at the cost of increasing the likelihood and cost of Type II errors (or false negatives).
Tuesday, August 3, 2021
Multiple Cournot oligopoly experiments found more collusive behavior in markets with fewer firms (Huck et al., 2004; Hostmann et al., 2018). This result could be explained by a higher difficulty to coordinate or by lower incentives to collude in markets with more firms. We show that the Quantal Response Equilibrium can explain how the change in incentives alone could result in more collusive output in smaller markets. We propose a new method to manipulate the group size while keeping constant the locations of key outcomes, payoffs at these outcomes and the incentives to collude. Experiments using this normalized payoff function find that the number of firms has no direct effect on the average output or profit. We conclude that higher rates of aggregate collusion in markets with fewer firms are driven by the changes in incentives or focality rather than purely the number of firms. These findings imply that antitrust policies aimed at preventing collusion should focus on incentives rather than on the market concentration.
Monday, August 2, 2021
Inequality concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of disadvantaged groups more heavily. A simple example illustrates the trade-offs involved in exempting redistribution agreements from cartel law. Permitting competitors to jointly set prices gives them the ability to price discriminate: overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a `Robin Hood cartel' is profitable, despite losing money on the poor and creating deadweight-losses. Yet the poor will be given only what is minimally required for permission to take profit-maximizing from the rich. A full-payout plan does not necessarily reduce total deadweight-losses. In essence, assigning a larger relative consumer welfare weight to the poor discounts inefficiencies on the rich.