Tuesday, November 8, 2022

Antitrust Presumptions for Digital Platforms

Antitrust Presumptions for Digital Platforms

Herbert Hovenkamp

University of Pennsylvania Carey Law School; University of Pennsylvania - The Wharton School; University College London

 

Abstract

Antitrust litigation often involves situations where important relevant information is limited or costly to obtain, behavior is complex and can have multiple explanations, or theory is not particularly well developed. As a result, legal and factual presumptions, evidentiary shortcuts, and assignment of the burden of proof can be critical and often decisive. This situation is common across all types of antitrust actions, including unilateral and collaborative conduct, as well as mergers. In general, the more complex an issue is or the market in which it occurs, the more valuable evidentiary shortcuts become, provided that they point us in the right direction. This paper considers how these constraints should be applied to large digital platform markets.

Uniquely harsh treatment threatens an error that antitrust policy has made before, which is excessive management of a part of the economy that is in fact notable for its superior performance. The need for and nature of presumptions or other evidentiary shortcuts should be partly based on our overall assessment of performance. If we believe that the markets dominated by large digital platforms are performing poorly, with a great deal of monopoly and low customer satisfaction, then stronger evidentiary biases against them might be warranted. However, if we think they are performing relatively well, then perhaps such presumptions should be weakened or not employed at all.

At the same time, however, the digital economy contains unique features that serve both to differentiate and to complicate antitrust analysis. Further, the opportunities for engaging in harmful exercises of market power are numerous. Large tech firms trade heavily, although not exclusively, in digital content; they have different cost structures than most traditional firms; they often operate on “two-sided” markets; and they are heavily involved in distribution with both direct and indirect network effects.

November 8, 2022 | Permalink | Comments (0)

Monday, November 7, 2022

Production Agreements, Sustainability Investments, and Consumer Welfare

Production Agreements, Sustainability Investments, and Consumer Welfare

 

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Leonard Treuren

KU Leuven - Department of Economics

Abstract

Schinkel and Spiegel (2017) finds that allowing sustainability agreements in which firms coordinate their investments in sustainability leads to lower investments and lower output. By contrast, allowing production agreements, in which firms coordinate output yet continue to compete on investments, boosts investments in sustainability and may also benefit consumers. We extend these results to the case where investments affect not only the consumers' willingness to pay, but also marginal cost. We show that sustainability agreements continue to lower investments and output levels, while production agreements increase investments but when they benefit consumers, they are not profitable for firms and will therefore not be formed. This implies that exempting horizontal agreements from the cartel prohibition cannot be relied on to advance sustainability goals and satisfy the competition law requirement that consumers must not be worse off.

November 7, 2022 | Permalink | Comments (0)

Reconceptualizing Imitation: Implications For Dynamic Capabilities, Innovation, And Competitive Advantage

Reconceptualizing Imitation: Implications For Dynamic Capabilities, Innovation, And Competitive Advantage

 

Hart E. Posen

University of Wisconsin-Madison

Jan-Michael Ross

Imperial College London

Brian Wu

University of Michigan, Stephen M. Ross School of Business

Stefano Benigni

Imperial College Business School

Zhi Cao

University of Nevada, Las Vegas - Lee School of Business; University of Wisconsin - Madison - Department of Management and Human Resources

Abstract

Strategic imitation occurs when a firm purposefully attempts to reproduce, in whole or part, other firms’ products, processes, capabilities, technologies, structures, and/or decisions in its pursuit of competitive advantage. Imitation is a pervasive firm behavior, and the literature relating to imitation is growing rapidly. In the resource-based view, for example, imitation is core because it is assumed to undermine inter-firm performance heterogeneity and erode leaders’ competitive advantage. We argue that work on imitation is circumscribed by a core set of assumptions: imitation is easy, weak firms imitate, uncertainty promotes imitation, and there is only one imitation strategy. We review the origins and implications of these assumptions in the extant literature, and, more importantly, expose a set of emerging counter-assumptions. In light of these counter-assumptions, we propose foundations for a new conceptual model of imitation that focuses on evolutionary dynamics. We suggest that imitation may be a key source of dynamic capabilities and innovation, and in turn it gives rise to competitive advantage.

November 7, 2022 | Permalink | Comments (0)

Friday, November 4, 2022

Leniency in Asian Competition Law

Leniency in Asian Competition Law

In response to cartel formation, competition lawyers and policymakers in nine Asian jurisdictions have experimented with leniency programmes. This mechanism allows firms to come forward with information in relation to their illegal cartel participation in return for a reduction of or immunity from a sanction. The experimentation plays out across three different dimensions: the revision of early adopted leniency programmes, the introduction of newly written leniency programmes, and the decision – deliberate or otherwise – not to create a leniency programme. This volume is the first to analyse the empirical evidence across a number of countries to determine how effective these measures have been, and how they have been amended in response to problems encountered. In this volume, local experts from key Asian jurisdictions, together with international experts, offer an introduction to this fast-developing field, and explore the theoretical, international and regulatory contexts of leniency programmes.

November 4, 2022 | Permalink | Comments (0)

The Sociology of Cartels

The Sociology of Cartels

 

Justus Haucap

Heinrich Heine University Dusseldorf - Department of Economics; German Institute for Economic Research (DIW Berlin)

Christina Heldman

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Abstract

Traditional economic theory of collusion assumed that cartels are inherently unstable, and yet some manage to operate for years or even decades. While the literature has presented several determinants of cartel stability, the vast majority focuses on firms as entities, even though cartels are typically formed between individuals who need to develop structures that allow them to establish trust and ensure cooperation. We analyze 15 German cartels, focusing on the individual participants, the communication and internal structures within the cartels as well as their breakup. Our results indicate that cartel members are highly homogeneous and often rely on existing networks within the industry. Most impressively, only two of the 156 individuals involved in these 15 cartels were female, suggesting that gender also plays a role for cartel formation. We further identify various forms of communication and divisions of responsibilities and show that leniency programs are a powerful tool in breaking up cartels. Based on these results we discuss implications for competition policy and further research.

November 4, 2022 | Permalink | Comments (0)

Thursday, November 3, 2022

Do the poor pay more for increasing market concentration? A study of retail petroleum

Do the poor pay more for increasing market concentration? A study of retail petroleum

By:

Franco Mairuzzo (Centre for Competition Policy and School of Economics, University of East Anglia); Peter Ormosi (Centre for Competition Policy and Norwich Business School, University of East Anglia)

Abstract:

One of the central tenets of industrial organisation is that increasing/decreasing market concentration is likely to lead to increased/reduced markups. But does this affect every consumer to the same extent? Previous literature agrees that there can be significant price dispersion even in the case of homogeneous goods, which is at least partially due to the heterogeneity in how much consumers engage with the market. We link this heterogeneity to the impact of changing market concentration on markups. For this purpose, we employ a combination of 18 years of station-level motor fuel price data from Western Australia and a rich set of information on local market concentration. We summon a non-parametric causal forest approach to explore the heterogeneity in the effect of market exit/entry. The paper offers evidence of the distributional effect of changing market concentration. Areas with lower income experience a larger increase in petrol stations’ price margin as a result of market exit. On the other hand, entry does not benefit the same low-income areas with a larger reduction in the margin than in high-income areas. We argue that these findings are due to differences in how much consumers in different demographic groups engage with the market. Our findings give support to the argument that antitrust could help address inequality while staying true to its mission of promoting competition, provided that priorities are given to not only fixing supply-side problems but also to exploring demand-side remedies.

URL:

http://d.repec.org/n?u=RePEc:uea:ueaccp:2021_08&r=

November 3, 2022 | Permalink | Comments (0)

The Slogans and Goals of Antitrust Law

The Slogans and Goals of Antitrust Law

 

Herbert Hovenkamp

University of Pennsylvania Carey Law School; University of Pennsylvania - The Wharton School; University College London

Abstract

This is a comparative examination of the slogans and goals most advocated for antitrust law today – namely, that antitrust should be concerned with “bigness,” that it should intervene when actions undermine the “competitive process,” or that it should be concerned about promoting some conception of welfare.

“Bigness” as an antitrust concern targets firms based on absolute size rather than share of a market, as antitrust traditionally has done. Over history, bigness has been a significant concern of populist antitrust movements. The bigness approach entails that antitrust cannot be concerned about low prices, or the welfare of consumers and labor. Nondominant firms could not sustain very high prices or cause significant reductions in market output. Concerns about bigness as such invariably translate into protection of small business, or of firms dedicated to older distribution methods of technologies. These firms can be injured by even nondominant rivals who have lower costs or more innovative supply.

The most important advantage of an antitrust policy of protecting the “competitive process” is the phrase’s rhetorical appeal. It invokes a classical liberal bias that sees process rather than substance as the key to good public decision making. However, classical liberalism reaches that point by beginning with a few bedrock substantive starting points, including protection of contract, property rights, and due process. No equivalent bedrock exists for the “competitive process.” As a result, people from the right and the left embrace it, and it cannot produce useful tools for decision making about competition issues. It operates as a slogan.

The history of antitrust welfare tests is rooted in neoclassical economics. Today, they are dominated by a “welfare tradeoff” model developed in the 1960s and a consumer welfare model, drawn mainly from antitrust’s statutory language and legislative history. The case law under Section 1 of the Sherman Act in particular has been explicit that antitrust's concern is protection from reduced market output and, concurrently, higher prices. Robert Bork did these tests severe damage by adopting a welfare tradeoff model and naming it “consumer welfare.” One of its prominent features was that identified increased consumer welfare with substantial market wide output reductions. The confusion that ensued has corrupted the debate over antitrust goals ever since. It explains at least part of the reason that so many people today regard consumer welfare tests as toothless, identified with higher margins and lack of competitiveness.

Finally, while many speak of “consumer welfare” as an antitrust goal, “welfare” is rarely what they measure. Rather, they measure – or better, estimate – changes in output or changes in price. The best statement of a welfare test for antitrust is a policy of encouraging markets to produce maximum sustainable output.

November 3, 2022 | Permalink | Comments (0)

Wednesday, November 2, 2022

Should Organizing Premier-Level European Football Be a Monopoly? And Who Should Run It? – An Economists’ Perspective

Should Organizing Premier-Level European Football Be a Monopoly? And Who Should Run It? – An Economists’ Perspective

Oliver Budzinski

Ilmenau University of Technology

Arne Feddersen

University of Southern Denmark - Department of Environmental and Business Economics

Abstract

The controversy around the breakaway European Super League, set to conquer the UEFA Champions League, and the surrounding antitrust proceedings revive the academic discussion about the monopoly power of sport-internal governing bodies (like the UEFA), the justification for and limits of their powers, and potential abuses of their power. Against this background, we discuss how much monopoly is unavoidable in premier-level European football and how its powers can be limited and, thus, scope and incentives for power abuse may be reduced. We particularly find that championship management can be periodically assigned to third-parties (like the Super League organizers) by tender procedures, thus, creating a periodical competition for the market, fueling innovation incentives and strengthening the influence of fans’ preferences.

November 2, 2022 | Permalink | Comments (0)

Consumer Privacy Concerns, Multihoming, and Platform Competition in Two-Sided Markets

Consumer Privacy Concerns, Multihoming, and Platform Competition in Two-Sided Markets

 

Xin Zhang

City University of Hong Kong (CityU); University of Science and Technology of China (USTC)

Hong Xu

Hong Kong University of Science & Technology (HKUST)

Wei Thoo Yue

City University of Hong Kong (CityU)

Yugang Yu

University of Science and Technology of China (USTC)

 

Abstract

Many online platforms adopt the ad-sponsored business model, which involves offering free services to consumers while collecting their data and selling targeted advertising space to advertisers. However, collecting consumer data has raised growing privacy concerns, which may affect consumers’ homing behavior, i.e., using one platform (i.e., single homing) or multiple platforms (multihoming). This study develops a game-theoretic model to examine how consumer privacy concerns affect platform competition on the advertiser side by focusing on advertising prices, advertiser demand, and platform profits. Our model allows both consumers and advertisers to choose single homing or multihoming endogenously. Our results show that growing privacy concerns can allow platforms to increase their prices because higher privacy concerns can lead to more single homing consumers, who are of higher value to advertisers. Furthermore, we find that the impact of privacy concerns on advertiser demand and platform profits depends on the substitutability of platforms’ targeting capabilities. Surprisingly, even when higher privacy concerns lead to fewer single homing consumers, platforms can attract more advertiser demand and achieve higher profits if they offer highly differentiated targeting options. Finally, we consider the case where platforms use exclusive contracts to lock in advertisers. Counter to the intuition that exclusive contracts tend to favor large platforms, we show that small platforms with lower targeting capability are more likely to benefit. We discuss relevant managerial and theoretical implications.

November 2, 2022 | Permalink | Comments (0)

Tuesday, November 1, 2022

Dynamic Pricing and Demand Volatility: Evidence from Restaurant Food Delivery

Dynamic Pricing and Demand Volatility: Evidence from Restaurant Food Delivery

 

 

Alexander MacKay

Harvard University - Business School (HBS)

Dennis Svartbäck

Priceff Ltd

Anders G. Ekholm

Priceff Ltd; Lappeenranta University of Technology (LUT); University of Helsinki

 

Abstract

Pricing technology that allows firms to rapidly adjust prices has two potential benefits. Prices can respond more rapidly to demand shocks, leading to higher revenues. On the other hand, time-varying prices can be used to smooth out demand across periods, reducing costs in markets with capacity constraints. Using data from the staggered adoption of a pricing algorithm, we measure the impacts of time-varying pricing in the context of restaurant food delivery. On average, the pricing algorithm reduced prices, though it led to substantial variation in prices within and across days. We find that the adoption of time-varying pricing reduced demand volatility, resulting in a relative increase in the share of transactions occurring during low-demand periods. We estimate that the volatility semi-elasticity, which we define to reflect the relationship between time-series variation in quantities and prices, is -1.96. Our results point to the potential efficiency gains of time-varying pricing when firms face capacity constraints.

November 1, 2022 | Permalink | Comments (0)

Civil Sanctions in Antitrust Public Enforcement

Civil Sanctions in Antitrust Public Enforcement

 

Max Huffman

Indiana University Robert H. McKinney School of Law

Abstract

This chapter speaks to the use of civil sanctions in public enforcement of laws governing marketplace competition, with a focus on civil sanctions under the Sherman Act, FTC Act, and parallel state law in the United States.

The chapter argues that the use of civil sanctions in private enforcement is inextricable from the supporting remedial structure, including criminal enforcement and meaningful private enforcement. Thus, the limited use of civil sanctions in the US depends largely on the backstop of both criminal and private enforcement. In the absence of meaningful criminal and private enforcement it is necessary instead to give greater weight to civil sanctions. This explains both the greater reliance on civil sanctions in Europe and elsewhere on the globe and the increased call for civil fining authority for one or both federal enforcement agencies in the United States.

The chapter explains the theory of civil fines in law enforcement and reasons for a jurisdiction’s choosing one or the other form of sanctions. The chapter then explains the structure of remedies for antitrust violations in the US system, highlighting the three forms of public enforcement and the backstop of private enforcement. The chapter turns to recent developments in civil remedies, including punitive fines as well as damages and related civil monetary relief. The chapter concludes by noting the complementary nature of antitrust remedies and the need for increased attention to civil monetary relief when other remedies are given less prominence.

November 1, 2022 | Permalink | Comments (0)

Monday, October 31, 2022

AI Adoption in a Competitive Market

AI Adoption in a Competitive Market

 

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

 

Abstract

Economists have often viewed the adoption of artificial intelligence (AI) as a standard process innovation where we expect that efficiency will drive adoption in competitive markets. This paper models AI based on recent advances in machine learning that allow firms to engage in better prediction. Using prediction of demand, it is demonstrated that AI adoption is a complement to variable inputs whose levels are directly altered by predictions and use is economised by them (that is, labour). It is shown that, in a competitive market, this increases the short-run elasticity of supply and may or may not increase average equilibrium prices. There are generically externalities in adoption with this reducing the profits of non-adoptees when variable inputs are important and increasing them otherwise. Thus, AI does not operate as a standard process innovation and its adoption may confer positive externalities on non-adopting firms. In the long-run, AI adoption is shown to generally lower prices and raise consumer surplus in competitive markets.

October 31, 2022 | Permalink | Comments (0)

Interoperability in Digital Markets: Boon or Bane for Market Contestability?

Interoperability in Digital Markets: Boon or Bane for Market Contestability?

Marc Bourreau

Telecom ParisTech

Jan Kraemer

University of Passau; Center on Regulation in Europe (CERRE)

Date Written: July 25, 2022

Abstract

Policymakers worldwide discuss whether interoperability obligations are an appropriate regulatory tool to promote contestability and competition in digital markets where network effects are strong. In the EU, the Digital Markets Act imposes horizontal interoperability obligations on dominant messaging services, requiring them to allow rival services to connect to their network. The standard economic wisdom is that interoperability is pro-competitive in the presence of an incumbent with a large user base, because interoperability lowers the entry barriers constituted by network effects. However, we show that this logic is incomplete in the dynamic context of digital services, where only partial interoperability can be achieved and multihoming is economically feasible. Absent full interoperability some proprietary network effects remain and consumers still gravitate to the larger network in order to take advantage of the full richness of features. At the same time, horizontal interoperability lowers the incentives of consumers to multihome services, which is a powerful driver for contestability. We develop a dynamic multi-period model, which formalizes the trade-off between the (imperfect) sharing of network effects through interoperability and reduced incentives to multihome. We highlight that mandated interoperability can impede the ability of a more efficient entrant platform to contest the less efficient dominant platform. Hence, our results have immediate implications for the ongoing policy debate by demonstrating that horizontal interoperability obligations do not only have pro-competitive, but also anti-competitive effects and may thus not be an appropriate remedy for regulating dominant online platforms.

October 31, 2022 | Permalink | Comments (0)

Friday, October 28, 2022

The Competitive Efficacy of Divestitures: An Empirical Analysis of Generic Drug Markets

The Competitive Efficacy of Divestitures: An Empirical Analysis of Generic Drug Markets

 

Viola Chen

Government of the United States of America - Federal Trade Commission

Christopher Garmon

Bloch School of Management

Kenneth Rios

Federal Trade Commission

David Schmidt

Federal Trade Commission

 

Abstract

One approach that antitrust enforcement authorities use to address potentially anticompetitive mergers is to seek divestitures in specific, competitively problematic overlap markets while allowing the rest of the merger to consummate. We evaluate the efficacy of this approach by studying divestitures in 230 generic drug markets ordered by the U.S. Federal Trade Commission to remedy 25 mergers of generic prescription drug manufacturers from 2005 to 2016. We evaluate the evolution of price, number of competitors, number of entrants, concentration, market shares, and exit via contemporaneous comparisons between markets experiencing divestitures to those that did not. We find that after two to four years, divestiture markets evolve to have fewer competitors (0.21 to 0.36 fewer relative to an initial average of 3.8 competitors), driven more by less entry (0.22 to 0.33 fewer relative to an average of approximately one entrant) rather than greater exit, and they exhibit higher concentration (420 to 532 points higher than the pre-divestiture average of 4525 on the 10,000 HHI scale). Average price changes in divestiture markets exceed those in non-divestiture markets by between 1.6% and 5.5% two to four years post-divestiture, although unlike the structural market characteristics, the price differences are not statistically significant. We also find that non-divested competitors more frequently experience market share growth compared to divested counterparts. Lastly, we find that differences in exit rates emerge at the five-year mark (about 9% of divested drugs exit compared to 5% of similar non-divested drugs).

October 28, 2022 | Permalink | Comments (0)

Thursday, October 27, 2022

Partial Vertical Ownership, Capacity Investment and Information Exchange in a Supply Chain

Partial Vertical Ownership, Capacity Investment and Information Exchange in a Supply Chain

 

Tal Avinadav

Bar-Ilan University

Noam Shamir

Tel-Aviv University

 

Abstract

Partial vertical ownership describes a situation in which a firm holds financial shares in either its supplier (referred to as partial backward integration) or its customer (partial forward integration). We study the effect of such financial interconnectedness on two operational decisions: capacity investment and information exchange. In our model, a retailer, who has superior information about the future market demand, has passive financial holdings in the supplier. Although this passive financial investment does not enable the retailer to directly influence the supplier’s operational decisions, it does affect the market equilibrium. Specifically, financial interconnectedness between the firms can result in the retailer financing the entire capacity in the market. In addition, we characterize the conditions that ensure that information between the retailer and the supplier can be exchanged via cheap-talk communication. Interestingly, high level of information asymmetry facilitates the exchange of information via cheap-talk in the presence of these financial links. When cheap talk is not possible, we study the separating equilibrium that is achieved through the retailer’s commitment to order in advance. In this case, the separating quantity can either increase or decrease with the level partial vertical ownership, and this trend does not depend the actual level of the financial holdings. We further analyze the incentive of the retailer to conceal demand information by choosing a pooling equilibrium, and conclude with discussing the effect of the financial interconnectedness on the parties’ operational payoffs.

October 27, 2022 | Permalink | Comments (0)

Wednesday, October 26, 2022

Measuring Deterrence Motives in Dynamic Oligopoly Games

Measuring Deterrence Motives in Dynamic Oligopoly Games

 

Limin Fang

University of British Columbia

Nathan Yang

Cornell University

 

Abstract

This paper presents a new decomposition approach for measuring deterrence motives in dynamic oligopoly games. Our approach yields a scale-free and interpretable measure of deterrence motives that informs researchers about the proportion for which deterrence motives account of all entry motives. We illustrate the use of our new approach by conducting an empirical case study about the dynamics of coffee chain stores in Toronto, Canada from 1989 to 2005. Under this empirical context, our measure of deterrence motives, quantified based on the estimates of structural primitives, suggests that a noticeable proportion of entry motives can be attributed to deterrence, and is as high as 32% for the increasingly dominant coffee chain Starbucks in certain types of markets. In summary, the empirical study demonstrates that our method has the capabilities to establish the "who" and "when" dimensions of deterrence.

October 26, 2022 | Permalink | Comments (0)

Tuesday, October 25, 2022

Limiting Algorithmic Cartels

Limiting Algorithmic Cartels

 

 

Michal Gal

University of Haifa - Faculty of Law

 

Abstract

Recent studies have proven that pricing algorithms can autonomously learn to coordinate prices, and set them at supra-competitive levels. The growing use of such algorithms mandates the creation of solutions that limit the negative welfare effects of algorithmic coordination. Unfortunately, to date, no good means exist to limit such conduct. While this challenge has recently prompted scholars from around the world propose different solutions, many suggestions are inefficient or impractical, and some might even strengthen coordination.

This challenge requires thinking outside the box. Accordingly, this article suggests four (partial) solutions. The first is market-based, and entails using consumer algorithms to counteract at least some of the negative effects of algorithmic coordination. By creating buyer power, such algorithms can also enable offline transactions, eliminating the online transparency that strengthens coordination. The second suggestion is to change merger review so as to limit mergers that are likely to increase algorithmic coordination. The next two are more radical, yet can capture more cases of such conduct. The third involves the introduction of a disruptive algorithm, which would disrupt algorithmic coordination by creating noise on the supply side. The final suggestion entails freezing the price of one competitor, in line with prior suggestions to address predatory pricing suggested by Edlin and others. The advantages and risks of each solution are discussed. As antitrust agencies around the world are just starting to experiment with different ways to limit algorithmic coordination, there is no better time to explore how best to achieve this important task.

October 25, 2022 | Permalink | Comments (0)

Monday, October 24, 2022

Common Ownership and Relative Performance Evaluation

Common Ownership and Relative Performance Evaluation

 

Miguel Anton

University of Navarra, IESE Business School

Florian Ederer

Yale School of Management; Yale University - Cowles Foundation

Mireia Gine

IESE Business School, University of Navarra ; The University of Pennsylvania

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Date Written: August 15, 2016

Abstract

We show theoretically and empirically that executives are paid less for their own firm’s performance and more for their rivals’ performance if an industry’s firms are more commonly owned by the same set of investors. Higher common ownership also leads to higher unconditional total pay. We exploit quasi-exogenous variation in common ownership from a mutual fund trading scandal to support a causal interpretation. These findings challenge conventional assumptions in the corporate finance literature about the objective function of the firm.

October 24, 2022 | Permalink | Comments (0)

Friday, October 21, 2022

The Impact of Dollar Store Expansion on Local Market Structure and Food Access

The Impact of Dollar Store Expansion on Local Market Structure and Food Access

 

El Hadi Caoui

Rotman School of Management; University of Toronto at Mississauga - Department of Management

Brett Hollenbeck

University of California, Los Angeles (UCLA) - Anderson School of Management

Matthew Osborne

University of Toronto at Mississauga - Department of Management

Date Written: June 22, 2022

Abstract

This paper studies the expansion of dollar store chains in the U.S. retail landscape following the Great Recession (2008–2019). This expansion has been accompanied by growing public concern over the impact on local retail markets and food accessibility in local communities. We develop an empirical framework to evaluate this impact and the role of entry regulation policies. A dynamic game of entry, exit and investment into spatially differentiated locations is specified, allowing for chain-level economies of density. Reduced-form evidence and counterfactual simulations reveal that dollar store chains compete strongly with the grocery and convenience segments and that dollar store expansion has led to a large decline in the number of grocery stores, and modest but significant reduction in fresh produce consumption.

October 21, 2022 | Permalink | Comments (0)

Thursday, October 20, 2022

The Distortive Effects of Antitrust Fines Based on Revenue

The Distortive Effects of Antitrust Fines Based on Revenue

 

 

Yannis Katsoulacos

Athens University of Economics and Business

Vasiliki Bageri

Athens University of Economics and Business

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Abstract

In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterize their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.

October 20, 2022 | Permalink | Comments (0)