nep-com New Economics Papers
on Industrial Competition
Issue of 2014‒12‒29
24 papers chosen by
Russell Pittman
United States Department of Justice

  1. Competitive Screening under Heterogeneous Information By Garrett, Daniel; Gomes, Renato; Maestri, Lucas
  2. Toward a theory of monopolistic competition By Parenti, Mathieu; Thisse, Jacques-François; Ushchev, Philip
  3. A Theory of Buyer Fragmentation: Divide-and-Conquer Intensifies Competition By Jeon, Doh-Shin; Menicucci, Domenico
  4. Cannibalization within the Single Vertically Di¤erentiated Duopoly By Ryoma Kitamura; Tetsuya Shinkai
  5. From Bertrand to Cournot via Kreps and Scheinkman: a hazardous journey By WAUTHY, Xavier Y.; ,
  6. Certification and Market Transparency By Stahl, Konrad; Strausz, Roland
  7. Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity By Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
  8. Research and Development of an Optimally Regulated Monopolist with Unknown Costs By SAGLAM, ISMAIL
  9. Direct and Cross-Scheme Effects in a Research and Development Subsidy Program By Hottenrott, Hanna; Lopes Bento, Cindy; Veugelers, Reinhilde
  10. Acquisitions by Multinationals and Trade Liberalization By Ray Chaudhuri, A.
  11. Licensing to vertically related markets By SCHOLZ, Eva-Maria
  12. Pricing a Package of Services - When (not) to bundle By Ketelaar, Felix; Szalay, Dezsö
  13. Optimal Leniency Programs when Firms Have Cumulative and Asymmetric Evidence By Blatter, Marc; Emons, Winand; Sticher, Silvio
  14. PROTECTION OF COMPETITION POLICY IN SERBIA By Milan Petković, Svetislav Stanković
  15. Consumer Search Costs and Preferences on the Internet By Jolivet, Grégory; Turon, Hélène
  16. Reassessing competition concerns in electronic communications markets By Peitz, Martin; Valletti, Tommaso
  17. Consumer Price Search and Platform Design in Internet Commerce By Michael Dinerstein; Liran Einav; Jonathan Levin; Neel Sundaresan
  18. Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction By Buehler, Stefan; Boom, Anette
  19. Capacity Payment Mechanisms and Investment Incentives in Restructured Electricity Markets By Brown, David
  20. A Bilevel Programing Approach to Modeling of Power Transmission Capacity Planning By Paolo Pisciella; Marida Bertocchi; Maria Teresa Vespucci
  21. Prescribing Behavior of General Practitioners : Competition Matters! By Schaumans, C.B.C.
  22. A quantitative analysis of the retail market for illicit drugs By Manolis Galenianos; Alessandro Gavazza
  23. Limited Deposit Insurance Coverage and Bank Competition By Shy, Oz; Stenbacka, Rune; Yankov, Vladimir
  24. Trademark Rights, Comparative Advertising, and “Perfume Comparison Lists” – An Untold Story of Law and Economics By Tim W. Dornis; Thomas Wein

  1. By: Garrett, Daniel; Gomes, Renato; Maestri, Lucas
    Abstract: We study competition in price-quality menus when consumers privately know their valuation for quality (type), and are heterogeneously informed about the offers available in the market. While firms are ex-ante identical, the menus offered in equilibrium are ordered so that more generous menus leave more surplus uniformly over types. More generous menus provide quality more efficiently, serve a larger range of consumers, and generate a greater fraction of profits from sales of low-quality goods. By varying the mass of competing firms, or the level of informational frictions, we span the entire spectrum of competitive intensity, from perfect competition to monopoly.
    Keywords: adverse selection; competition; heterogeneous information; price discrimination; screening
    JEL: D82
    Date: 2014–06
  2. By: Parenti, Mathieu; Thisse, Jacques-François; Ushchev, Philip
    Abstract: We propose a general model of monopolistic competition, which encompasses existing models while being flexible enough to take into account new demand and competition features. The basic tool we use to study the market outcome is the elasticity of substitution at a symmetric consumption pattern, which depends on both the per capita consumption and the total mass of varieties. We impose intuitive conditions on this function to guarantee the existence and uniqueness of a free-entry equilibrium. Comparative statics with respect to population size, GDP per capita and productivity shock are characterized through necessary and sufficient conditions. Finally, we show how our approach can be generalized to the case of a multisector economy and extended to cope with heterogeneous firms and consumers.
    Keywords: additive preferences; general equilibrium; homothetic preferences; monopolistic competition
    JEL: D43 L11 L13
    Date: 2014–06
  3. By: Jeon, Doh-Shin; Menicucci, Domenico
    Abstract: It is well-known from Innes and Sexton (1993, 1994) that divide-and-conquer contracts allow an incumbent facing a potential entrant to extract more surplus from buyers and hence buyers suffer from the strategy. In this paper, we show that when sellers compete by offering personalized non-linear tariffs, divide-and-conquer strategies intensify competition among sellers in the presence of indirect contracting externalities. Therefore, buyers prefer remaining fragmented to forming a buyer group. When buyer group formation is decided before the entry of an entrant, our result implies that buyers may deliberately induce a socially suboptimal entry by remaining fragmented in order to benefit from more intense competition upon the entry.
    Keywords: Divde-and-Conquer, Buyer Group, Indirect Contracting External- ities, Common Agency, Competition in Non-linear Tari¤s, Multimarket Contact.
    JEL: D4 K21 L41 L82
    Date: 2014–11–26
  4. By: Ryoma Kitamura (Graduate School of Economics, Kwansei Gakuin University); Tetsuya Shinkai (School of Economics, Kwansei Gakuin University)
    Abstract: We consider cannibalization in a duopoly model in which …rms with di¤erent costs supply two vertically di¤erentiated products in the same market. We …nd that an increase in the di¤erence in quality between the two goods or a decrease in the marginal cost of the high-quality goods leads to cannibalization. As a result, these goods keep low-quality goods from the market. Then, as the di¤erence in quality between the two goods increases from a su¢ ciently small to a su¢ ciently large level, we …nd that 1) cannibalization from the low-quality good to the high- quality good of the e¢ cient …rm expands, 2) cannibalization from the high-quality good to the low-quality good of the ine¢ cient …rm shrinks. Further, we establish that 3) an increase in the production costs of the ine¢ cient …rm improves social welfare when the di¤erence in quality between the two goods is su¢ ciently small.
    Keywords: Multi-product …rm, Duopoly, Cannibalization, Vertical product di¤erentiation
    JEL: D21 D43 L13 L15
    Date: 2014–12
  5. By: WAUTHY, Xavier Y. (CEREC, Université Saint-Louis, B-1000 Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); ,
    Abstract: The mininal core of strategic decisions a firm has to make is three-fold: What to produce? At which scale? At what price? A full-fledged theory of oligopolistic competition should be able to embrace these three dimensions jointly. Starting from the Cournot-Bertrand dispute and the stream of research it gave birth to, this survey shows that we are far from having such a theory at our disposal today. Many papers cover two dimensions out of three and display insightful results but no paper satisfactorily addresses the complete picture. I discuss the limitations of the different approaches that have been undertaken. This discussion sets a clear agenda for further theoretical research on the oligopoly front.
    Keywords: Bertrand, Cournot, Edgeworth, product differentiation, capacity constraints
    JEL: L13
    Date: 2014–07–03
  6. By: Stahl, Konrad; Strausz, Roland
    Abstract: We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification yields more transparency and higher social welfare. Under buyer-certification profit maximizing certifiers further limit transparency, but because seller-certification yields larger profits, active regulation concerning the mode of certification is not needed. These findings are robust and widely applicable to, for instance, patents, automotive parts, and financial products.
    Keywords: Market Transparency , Certification , Information and Product Quality , Asymmetric Information
    JEL: D82 G24 L15
    Date: 2014
  7. By: Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
    Abstract: Using data from three sources (a laboratory experiment, a field study, and a large US supermarket chain), we document a surprising asymmetric behavior of 9-ending prices: they are more rigid upward, but not downward, in comparison to non 9-ending prices. The data from the lab experiment and the field study suggest that shoppers are less likely to notice higher prices when they end with 9, or price increases when the new prices end with 9, in comparison to other endings. The consumers' misperception seems to be caused by their use of 9-endings as a signal for low prices, which interferes with price information processing. The supermarket data suggest that retail price setters respond strategically to the consumer misperception by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9-ending. Consequently, 9-ending prices exhibit asymmetric rigidity: they are more rigid than non 9-ending prices upward but not downward.
    Keywords: Price Points,Price Recall,Sticky Prices,Rigid Prices,Price Rigidity,Price Adjustment,9-Ending Prices,Psychological Prices,Asymmetric Price Adjustment
    JEL: E31 L16 C91 C93 D03 D80 M31
    Date: 2014–11–05
    Abstract: This paper studies whether a monopolist with private marginal cost information has incentives to make cost-reducing innovations through research and development (R&D) when its output and price are regulated according to the incentive-compatible mechanism of Baron and Myerson (1982). Under several assumptions concerning the cost of R&D and the regulator's beliefs about the marginal cost, we characterize the optimal level of R&D activities for the regulated monopolist when these activities are observed by the regulator as well as when they are not. We show that the regulated monopolist always chooses a higher level of R&D activities when its activities are unobserved. In situations where the social welfare attaches a sufficiently high weight to the monopolist welfare, the monopolist's R&D activities in the unobservable case even realize at a higher level than its activities when its output and price are not regulated. Moreover, whenever R&D activities increase productive efficiency, a less efficient monopolist would choose a higher level of R&D activities than a more efficient monopolist, irrespective of the observability of R&D.
    Keywords: Monopoly; Regulation; Research and Development.
    JEL: D82 L51 O32
    Date: 2014–11–27
  9. By: Hottenrott, Hanna; Lopes Bento, Cindy; Veugelers, Reinhilde
    Abstract: This study investigates the effects of an R&D subsidy scheme on participating firms’ net R&D investment. Making use of a specific policy design in Belgium that explicitly distinguishes between research and development grants, we estimate direct and cross-scheme effects on research versus development intensities in recipients firms. We find positive direct effects from research (development) subsidies on net research (development) spending. This direct effect is larger for research grants than for development grants. We also find cross-scheme effects that may arise due to complementarity between research and development activities. Finally, we find that the magnitude of the treatment effects depends on firm size and age and that there is a minimum effective grant size, especially for research projects. The results support the view that public subsidies induce higher additional investment particularly in research where market failures are larger, even when the subsidies are targeting development.
    Keywords: complementarity; development subsidies; innovation policy; R&D; research subsidies
    JEL: H23 O31 O38
    Date: 2014–10
  10. By: Ray Chaudhuri, A. (Tilburg University, Center For Economic Research)
    Abstract: Abstract This paper develops a theoretical framework where a multinational firm (MNE) is allowed to acquire or sell a productive asset in multiple segmented asset markets. The asset is used to produce a final good which can be sold in multiple countries, with segmented product markets, undergoing trade liberalization. I explicitly model the asset markets as well as the product markets. The paper identifies initial conditions in terms of the MNE’s pre-liberalization asset holdings across different segmented markets as a crucial factor for determining whether merger waves are triggered by trade liberalization. The more asymmetric the pre-liberalization asset holdings of the MNE across the multiple segmented markets, the more likely that trade liberalization induces an international merger wave that may harm consumers by raising product prices in multiple markets.
    Keywords: acquisitions; multinational firms; endogenous mergers; cross-border mergers; trade liberalization
    JEL: F23 L12 L41 F13
    Date: 2014
  11. By: SCHOLZ, Eva-Maria (Université catholique de Louvain, CORE, Belgium)
    Abstract: We analyse the problem of a non-producing patentee who licenses an essential process innovation to a vertical Cournot oligopoly. The vertical oligopoly is composed of an upstream and a downstream sector which may differ in their efficiency or, in other words, in the benefit they derive from the innovation. In this framework we characterise the optimal licensing contract in terms of the licensing revenue maximising policy (fixed-fee or per-unit royalty) and sector (upstream and/or downstream sector). First, it is shown that under a fixed-fee contract licensing to the less efficient industry sector may be the patentee’s licensing revenue maximising strategy. Here, licensing to a less efficient downstream market is all the time optimal in terms of consumer surplus and aggregate economic welfare. Conversely, licensing to a less or equally efficient upstream industry is potentially inefficient. Second, our findings reveal that the optimal licensing policy is sector dependent. A per-unit royalty contract may dominate a fixed-fee policy on the downstream market in terms of licensing revenues, while offering a per-unit royalty contract to the upstream industry is never optimal. As a third and final point we address the case of licensing to both industry sectors. Here we also identify conditions under which two-sector licensing of both sectors is less profitable than one-sector licensing of a single industry (and vice versa).
    Keywords: licensing contracts, fixed-fee, royalties, vertical Cournot oligopoly
    JEL: D43 L13 O31 O34
    Date: 2014–06–11
  12. By: Ketelaar, Felix; Szalay, Dezsö
    Abstract: We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely, if consumer types are negatively affiliated over some portion of types then some bundling occurs.
    Keywords: Price discrimination; Bundling; Monopoly; Multidimensional screening
    JEL: D42 D82 D86
    Date: 2014–12
  13. By: Blatter, Marc; Emons, Winand; Sticher, Silvio
    Abstract: An antitrust authority deters collusion using fines and a leniency program. Unlike in most of the earlier literature, our firms have imperfect cumulative evidence of the collusion. That is, cartel conviction is not automatic if one firm reports: reporting makes conviction only more likely, the more so, the more firms report. Furthermore, the evidence is distributed asymmetrically among firms. Asymmetry of the evidence can increase the cost of deterrence if the high-evidence firm chooses to remain silent. Minimum-evidence standards may counteract this effect. Under a marker system only one firm reports; this may increase the cost of deterrence.
    Keywords: antitrust; cartels; deterrence; evidence; leniency
    JEL: D43 K21 K42 L40
    Date: 2014–08
  14. By: Milan Petković, Svetislav Stanković (Visoka škola strukovnih studija za kriminalistiku i bezbednost, Nis)
    Abstract: Free trade and protection of competition on the market do little to benefit a large number of people a monopolized market provides a great benefit a few individuals. Without competition there is no free market. While in terms of general social interest competition is usually a desirable phenomenon in the market, from the point of view of the individual undertaking it is undesirable evil, because it forces them to work harder, and at the same time it reduces the profit.
    Keywords: Competition law, anti-trust policy, The Competition Commission
    JEL: E60 M21 O25
    Date: 2014–04
  15. By: Jolivet, Grégory (University of Bristol); Turon, Hélène (University of Bristol)
    Abstract: We analyse consumers' search and purchase decisions on an Internet platform. Using a rich dataset on all adverts posted and transactions made on a major French Internet platform (PriceMinister), we show evidence of substantial price dispersion among adverts for the same product. We also show that consumers do not necessarily choose the cheapest advert available and sometimes even choose an advert that is dominated in price and non-price characteristics (such as seller's reputation) by another available advert. To explain the transactions observed on the platform, we derive and estimate a structural model of sequential directed search where consumers observe all advert prices but have to pay a search cost to see the other advert characteristics. We allow for flexible heterogeneity in consumers' preferences and search costs. After deriving tractable identification conditions for our model, we estimate sets of parameters that can rationalize each transaction. Our model can predict a wide range of consumer search strategies and fits almost all transactions observed in our sample. We find empirical evidence of heterogenous, sometimes positive and substantially large search costs and marginal willingness to pay for advert hedonic characteristics.
    Keywords: consumer search, revealed preferences, individual heterogeneity, price dispersion, internet
    JEL: C13 D12 D81 D83 L13
    Date: 2014–11
  16. By: Peitz, Martin; Valletti, Tommaso
    Abstract: Central features of today's electronic communications markets are complementarities between the different layers of the value chain, substitutability between some applications, network effects in the provision of content and services, two-sided business models that partly involve indirect revenue generation (such as advertising and data profiling), and a patchwork of regulated and unregulated segments of the market. This complexity requires a fresh look at the market forces shaping the industry and a rethinking of market definitions and of the assessment of market power. This article presents the state of play in European electronic communication markets, with a particular emphasis on the recent development of 'over the tops'. We also use a stylised model of an electronic communications market to draw some central lessons from economic theory and to elaborate on market definition and market power.
    Keywords: telecommunications,OTT,relevant market,two-sided markets,market power
    JEL: D82 L13 L41 L51 L86 L96
    Date: 2014
  17. By: Michael Dinerstein (Stanford University); Liran Einav (Stanford University); Jonathan Levin (Stanford University); Neel Sundaresan (eBay Inc)
    Abstract: Search frictions can explain why the "law of one price" fails in retail markets and why even firms selling commodity products have pricing power. In online commerce, physical search costs are low, yet price dispersion is common. We use browsing data from eBay to estimate a model of consumer search and price competition when retailers offer homogeneous goods. We find that retail margins are on the order of 10%, and use the model to analyze the design of search rankings. Our model explains most of the effects of a major re-design of eBay's product search, and allows us to identify conditions where narrowing consumer choice sets can be pro-competitive. Finally, we examine a subsequent A/B experiment run by eBay that illustrates the greater difficulties in designing search algorithms for differentiated products, where price is only one of the relevant product attributes.
    Date: 2014–08
  18. By: Buehler, Stefan; Boom, Anette
    Abstract: We study the role of vertical structure in determining generating capacities and retail prices in the electricity industry. Allowing for uncertain demand, we compare three market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that equilibrium capacities and retail prices are such that welfare is highest (lowest) under separated (integrated) duopoly. The driving force behind this result is the risk of rent extraction faced by competing integrated generators on the wholesale market. Our analysis suggests that vertical structure plays an important role in determining generating capacities and retail prices.
    Keywords: Electricity, Investments, Generating Capacities, Vertical Integration, Monopoly and Competition
    JEL: D42 D43 D44 L11 L12 L13
    Date: 2014–12
  19. By: Brown, David (University of Alberta, Department of Economics)
    Abstract: I analyze the ability of capacity payment mechanisms to alleviate underinvestment in electricity generation capacity. I derive the optimal capacity payment parameters under two capacity payment mechanisms, when capacity demand is price-elastic and when it is price-inelastic. Price-elastic capacity demand reduces the firms’ abilities to exercise market power, alleviates the bimodal capacity market pricing structure, and reduces the degree of market concentration.Further, at the optimal capacity demand parameters, expected welfare, consumer surplus, and aggregate capacity is higher under the price-elastic demand setting. However, a certain degree of underinvestment in generation capacity persists. These findings support the movement of regulatory policy towards a price-elastic capacity demand regime with market monitoring.
    Keywords: electricity; capacity markets; reliability; market power; regulation
    JEL: D44 L13 L50 L94 Q40
    Date: 2014–12–01
  20. By: Paolo Pisciella; Marida Bertocchi; Maria Teresa Vespucci
    Abstract: We propose a TransCo model for coordinating transmission expansion planning with com- petitive generation capacity planning in electricity markets. Our purpose is to provide a tool to simulate the equilibrium interplay regarding strategic decisions of a set of power producers and a single transmission operator. The solution represents an iterative process for de ning the optimal transmission expansion program together with a correct guess of the power plants expansion program for each GenCo involved. The composition of new investments in power plants guessed by the TransCo must coincide with the optimal expansion plan de ned by each GenCo. We illustrate the methodology by means of an example depicting a zonal electricity market with two zones.
    Date: 2013
  21. By: Schaumans, C.B.C. (Tilburg University, TILEC)
    Abstract: Background: General Practitioners have limited means to compete. As quality is hard to observe by patients, GPs have incentives to signal quality by using instruments patients perceive as quality. Objectives: We investigate whether GPs exhibit different prescribing behavior (volume and value of prescriptions) when confronted with more competition. As there is no monetary benefit in doing so, this type of (perceived) quality competition originates from GPs satisfying patients’ expectations. Method: We look at market level data on per capita and per contact number of items prescribed by GPs and the value of prescriptions for the Belgian market of General Practitioners. We test to which extent different types of variables explain the observed variation. We consider patient characteristics, GP characteristics, number and type of GP contacts and the level of competition. The level of competition is measured by GP density, after controlling for the number of GPs and a HHI. Results: We find that a higher number of GPs per capita results in a higher number of units prescribed by GPs, both per capita and per contact. We argue that this is consistent with quality competition in the GP market. Our findings reject alternative explanations of GP scarcity, availability effect in GP care consumption and GP dispersing prescription in time due to competition.
    Keywords: Competition; General Practitioners; Prescription; Drugs; Quality
    JEL: D22 I10 I11 L11 L15
    Date: 2014
  22. By: Manolis Galenianos (Royal Holloway, University of London); Alessandro Gavazza (London School of Economics)
    Abstract: We develop a theoretical framework to study illicit drugs markets, and we estimate it using data on drug purchases. Buyers are searching for high-quality drugs, but they can determine drugs' quality (i.e., their purity) only after consuming them. Hence, sellers can rip-off first-time buyers, or can offer higher-quality drugs to induce buyers to purchase again from them. In equilibrium, a distribution of qualities persists. The estimated model implies that increasing penalties may increase the purity and the affordability of drugs traded, because it increases sellers' relative profitability of targeting loyal buyers versus first-time buyers.
    Date: 2014
  23. By: Shy, Oz (Federal Reserve Bank of Boston); Stenbacka, Rune (Hanken School of Economics); Yankov, Vladimir (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Deposit insurance designs in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks to achieve higher or full deposit insurance coverage. We compare three regimes of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces total welfare relative to no or unlimited deposit insurance.
    Keywords: Limited deposit insurance coverage; deposit rates; bank competition
    JEL: G21
    Date: 2014–10–15
  24. By: Tim W. Dornis (Leuphana University of Lueneburg, Germany); Thomas Wein (Leuphana University of Lueneburg, Germany)
    Abstract: Regarding trademarks, the EU and US regulate comparative advertising differently. One particular matter of significant difference is whether or not competitors are allowed to say they offer an imitation or replica of a trademarked product. In the US, competitors may claim equality of their product as long they clearly eliminate confusion and distinctly market their product as separate from the original. European firms, by contrast, face more obstacles concerning advertising statements conceived to establish their product as equal or identical to a competitor’s trademarked product. If the economic functions of trademarks are clear, it is easier to answer a number of legal questions in the comparative advertising field. One facet rarely explored is the fact that trademarks are the “name” of a product and the legal bridge between consumers’ past and future experiences. Such experiences are referred to as attributes or qualities of a product. Attributes describe product characteristics driving individual consumer experiences. Because such experiences are difficult to objectively verify, statements of this kind must submit to particular scrutiny. In principle, the same is true regarding product qualities. Quite often, it is easy to measure quality experiences, but sometimes measuring is not possible depending on whether qualities are public or private. Like with attributes, the legality of referring to product qualities depends on verifiability. Uncertainty of an attribute’s verifiability or quality information creates a risk of undue exploitation, particularly consumer confusion. In such cases, strict regulation of comparative advertising is important. In other words, the legal system must prevent confusion in advertising because confusion increases consumer search costs. In addition to preventing confusion, the issue of trademark dilution is another aspect relevant in analyzing comparative advertising. According to European doctrine, using a competitor’s trademark in comparative advertising can be improper goodwill misappropriation. Displaying a competitor’s trademark may diminish its distinctiveness, tarnish its image and reputation, or constitute what the ECJ defines as freeriding or parasitic competition. The meandering standards of legal doctrine, however, hardly provide for consistent guidelines. Whether misappropriation is a justifiable term to use in defining comparative advertising requires a closer look at the field’s underlying economics. As we will show, in none of these constellations will the appropriation of the competitor’s investment be implemented through the market mechanism. It is not a pecuniary, but a technological externality. The metric for assessing admissibility of appropriation must thus be changed from the governing European doctrine of necessity or proportionality to a principle of economic efficiency taking into account both the trademark owner’s and the advertising competitor’s costbenefitratio.
    Date: 2014–12

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