nep-com New Economics Papers
on Industrial Competition
Issue of 2020‒01‒20
27 papers chosen by
Russell Pittman
United States Department of Justice

  1. Media See-saws: Winners and Losers in Platform Markets By Simon P. Anderson; Martin Peitz
  2. Merger Policy in Digital Markets: An Ex-Post Assessment By Elena Argentesi; Paolo Buccirossi; Emilio Calvano; Tomaso Duso; Alessia Marrazzo; Salvatore Nava
  3. The competitive impacts of exclusivity and price transparency in markets with digital platforms By BELLEFLAMME, Paul,; PEITZ, Martin,
  4. Ad Clutter, Time Use and Media Diversity By Ad Clutter, Time Use and Media Diversity; Martin Peitz
  5. Identification and Estimation of Differentiated Products Models By David P. Byrne; Susumu Imai; Neelam Jain; Vasilis Sarafidis; Masayuki Hirukawa
  6. Cartel Formation with Quality Differentiation By Iwan Bos; Marco Marini; Riccardo Saulle
  7. Regulatory risk, vertical integration, and upstream investment By Fiocco, Raffaele; Guo, Dongyu
  8. Pricing of Complements in the U.S. Freight Railroads: Cournot Versus Coase By Alexei Alexandrov; Russell Pittman; Olga Ukhaneva
  9. The Effectiveness of EC Policies to Move Freight from Road to Rail: Evidence from CEE Grain Markets By Russell Pittman; Monika Jandová; Marcin Król; Larysa Nekrasenko; Tomáš Paleta
  10. State of New York v. Deutsche Telecom AG. Brief of Amici Curiae Nicholas Economides, John Kwoka, Thomas Philippon, Robert Seamans, Hal Singer, Marshall Steinbaum, and Lawrence J. White in Support of Plaintiffs By Nicholas Economides; John Kwoka; Thomas Philippon; Robert Seamans; Hal Singer; Marshall Steinbaum; Lawrence J. White
  11. COSTOS DE GENERACIÓN, INVERSIÓN Y PRECIOS DEL SECTOR ELÉCTRICO EN MÉXICO By Enriquez, Alejandra; Ramirez, Jose Carlos; Rosellon, Juan
  12. Market Structure and Financial Stability: Theory and Evidence By AMENDOLA, Adalgiso; BARRA, Cristian; BOCCIA, Marinella; PAPACCIO, Anna
  13. Storable good market with intertemporal cost variations By Antoniou, Fabio; Fiocco, Raffaele
  14. The Effect of Bargaining Power Determinants on Pharmaceutical Prices By Sebastian Linde; Brandon Norton; Ralph Siebert
  15. Perfect bidder collusion through bribe and request By Jingfeng Lu; Zongwei Lu; Christian Riis
  16. Optimal switching from competition to cooperation: a preliminary exploration By Raouf Boucekkine; Carmen Camacho; Benteng Zou
  17. What is the Impact of Increased Business Competition? By Sonia Feliz; Chiara Maggi
  18. From Product Concentration to Local Labor Market Outcomes: The Effect on Industry Wages By Petkov, Ivan
  19. Deregulation as a Source of China’s Economic Growth By Shiyuan Pan; Kai Xu; Kai Zhao
  20. Market Functioning & Market Integration in EU Network Industries – Telecommunications, Energy & Transport By Martijn Brons; Fotios Kalantzis; Lucia Vergano
  21. Moral Hazard and the Property Rights Approach to the Theory of the Firm By Schmitz, Patrick W.
  22. Movements, Moments, and the Eroding Antitrust Consensus By Wolfe, Michael
  23. Asymmetric price adjustment and the effects of structural reforms in a low income environment: the case of the gasoline market in Greece By Zacharias Bragoudakis; Dimitrios Sideris
  24. Tying in evolving industries, when future entry cannot be deterred By Chiara Fumagalli; Massimo Motta
  25. Marrying Neo-Chicago and Behavorial Antitrust By Huffman, Max; Keele, Benjamin John
  26. Who Bears the Welfare Costs of Monopoly? The Case of the Credit Card Industry By Kyle F. Herkenhoff; Gajendran Raveendranathan
  27. Common Ownership and Airlines: Evaluating an Alternate Ownership Data Source By Eric Lewis; Randy Chugh

  1. By: Simon P. Anderson; Martin Peitz
    Abstract: e customize the aggregative game approach to oligopoly to study media platforms which may differ by popularity. Advertiser, platform, and consumer surplus are tied together by a simple summary statistic. When media are ad-financed and ads are a nuisance to consumers we establish see-saws between consumers and advertisers. Entry increases consumer surplus, but decreases advertiser surplus if total platform profits decrease with entry. Merger decreases consumer surplus, but advertiser surplus tends to increase. By contrast, when platforms use two-sided pricing or consumers like advertising, advertiser and consumer interests are often aligned. We show see-saws under alternative homing assumptions.
    Keywords: two-sided markets, media economics, mergers, entry, advertising, aggregative games, single-homing, multi-homing, competitive bottleneck
    JEL: D43 L13
    Date: 2019–12
  2. By: Elena Argentesi; Paolo Buccirossi; Emilio Calvano; Tomaso Duso; Alessia Marrazzo; Salvatore Nava
    Abstract: This paper presents a broad retrospective evaluation of mergers and merger decisions in the digital sector. We first discuss the most crucial features of digital markets such as network effects, multi-sidedness, big data, and rapid innovation that create important challenges for competition policy. We show that these features have been key determinants of the theories of harm in major merger cases in the past few years. We then analyse the characteristics of almost 300 acquisitions carried out by three major digital companies –Amazon, Facebook, and Google –between 2008 and 2018. We cluster target companies on their area of economic activity and show that they span a wide range of economic sectors. In most cases, their products and services appear to be complementary to those supplied by the acquirers. Moreover, target companies seem to be particularly young, being four-years-old or younger in nearly 60% of cases at the time of the acquisition. Finally, we examine two important merger cases, Facebook/Instagram and Google/Waze, providing a systematic assessment of the theories of harm considered by the UK competition authorities as well as evidence on the evolution of the market after the transactions were approved. We discuss whether the CAs performed complete and careful analyses to foresee the competitive consequences of the investigated mergers and whether a more effective merger control regime can be achieved within the current legal framework.
    Keywords: digital markets, mergers, network effects, big data, platforms, ex-post, antitrust
    JEL: L40 K21
    Date: 2019
  3. By: BELLEFLAMME, Paul, (Université catholique de Louvain, CORE, Belgium); PEITZ, Martin, (Universität Mannheim)
    Abstract: Two-sided digital platforms not only decide about the price structure, but often have non-price instruments at their disposal. Our objective in this article is to review recent work that aims at better understanding the possible pro- or anti-competitive effects of two specific non-price strategies: exclusivity as the contractual obligation to singlehome and price transparency as the disclosure of information about otherwise unobserved prices paid by users on the other side. Regarding the incentives that platforms may have to restrict users from visiting more than one platform at a time, one finding is that when platforms find it profitable to impose exclusivity on one side, users on the other side always suffer. Regarding price transparency in situations in which users on one side may not observe the prices that platforms set on the other side, we find that a monopoly platform is willing to remedy this problem by being transparent about all prices, whereas competing platform would in general prefer more opaqueness. From our findings we derive lessons for competition authorities.
    JEL: H20 H31 H50
    Date: 2019–11–18
  4. By: Ad Clutter, Time Use and Media Diversity; Martin Peitz
    Abstract: We introduce advertising congestion along with a time-use model of consumer choice among media. Both consumers and advertisers multi-home. Higher equilibrium advertising levels ensue on less popular media platforms because platforms treat consumer attention as a common property resource: smaller platforms internalize less the congestion from advertising and so advertise more. Platform entry raises the ad nuisance “price” to consumers and diminishes the quality of the consumption experience on all platforms. With symmetric platforms, entry still leads to higher consumer benefits. However, entry of less attractive platforms can increase ad nuisance levels so much that consumers are worse off.
    Keywords: media economics, advertising clutter, limited attention, information congestion, two-sided markets
    JEL: D43 L13
    Date: 2019–12
  5. By: David P. Byrne; Susumu Imai; Neelam Jain; Vasilis Sarafidis; Masayuki Hirukawa
    Abstract: We propose a new methodology for estimating demand and cost functions of differentiated products models when demand and cost data are available. The method deals with the endogeneity of prices to demand shocks and the endogeneity of outputs to cost shocks by using cost data. We establish identification, consistency and asymptotic normality of our two-step Sieve Nonlinear Least Squares (SNLLS) estimator for the commonly used logit and BLP demand function specification. Using Monte-Carlo experiments, we show that our method works well in contexts where commonly used instruments are correlated with demand and cost shocks and thus biased. We also apply our method to the estimation of deposit demand in the US banking industry.
    Keywords: differentiated goods oligopoly, instruments, identification, cost data.
    JEL: C13 C14 L13 L41
    Date: 2019
  6. By: Iwan Bos; Marco Marini (Department of Social and Economic Sciences, Sapienza University of Rome and CREI, Italy); Riccardo Saulle (DSEA, University of Padova, Italy)
    Abstract: Research on collusion in vertically differentiated markets is conducted under one or two potentially restrictive assumptions. Either there is a single industry-wide cartel or costs are assumed to be independent of quality or quantity. We explore the extent to which these assumptions are indeed restrictive by relaxing both. For a wide range of coalition structures, profit-maximizing cartels of any size price most of their lower quality products out of the market as long as production costs do not increase too much with quality. If these costs rise sufficiently, however, then market share is maintained for all product variants. All cartel sizes may emerge in equilibrium when exclusively considering individual deviations, but the industry-wide cartel is the only one immune to deviations by coalitions of members. Overall, our findings suggest that firms have a strong incentive to coordinate prices when the products involved are vertically differentiated.
    Keywords: Cartel Formation, Collusion, Vertical Differentiation, Endogenous Coalition Formation, Industry-wide Cartel, Partial Cartels.
    JEL: D42 D43 L1 L12 L13 L41
    Date: 2019–12
  7. By: Fiocco, Raffaele; Guo, Dongyu
    Abstract: We investigate the impact of regulatory risk on vertical integration and upstream investment by a regulated firm that provides an essential input to downstream competitors. Regulatory risk reflects uncertainty about the regulator's commitment to a regulatory policy that promotes the regulated firm's unobservable investment effort. We show that, when the regulator sets the regulatory policy after the vertical industry structure has been established, some degree of regulatory risk is ex ante socially beneficial. Regulatory risk makes vertical integration profitable and stimulates upstream investment at a lower social cost. This occurs for moderate costs of investment effort and firm small risk aversion. Our analysis sheds new light on some relevant empirical patterns in vertically related markets.
    Keywords: commitment, moral hazard, regulatory risk, upstream investment, vertical integration, vertically related markets.
    JEL: D82 L43 L51
    Date: 2020–01
  8. By: Alexei Alexandrov; Russell Pittman (U.S. Department of Justice); Olga Ukhaneva (Georgetown University)
    Abstract: Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that price in case (2) is higher than price in case (1), suggesting that the complementary monopolist pricing ineficiency is absent in this market. For our main analysis, we use a specification consistent with the previous literature; however, our findings are robust to propensity score blocking and machine learning algorithms. Finally, we perform a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1), and these results are also consistent with our main findings. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, and royalty stacking and patent thickets.
    Keywords: vertical merger, double marginalization, mergers of complements, antitrust, tragedy of the anticommons, royalty stacking, patent thickets, intellectual property
    JEL: D23 D43 K21 L40 L92 O34
    Date: 2018–04
  9. By: Russell Pittman (U.S. Department of Justice); Monika Jandová (Masaryk University); Marcin Król (Warsaw School of Economics); Larysa Nekrasenko (Poltava State Agrarian Academy); Tomáš Paleta (Masaryk University)
    Abstract: The European Commission years ago adopted a policy of encouraging the substitution of motor carrier haulage of freight with rail and water carrier haulage, as part of its “green” agenda of reducing fuel consumption, emission of pollutants, carbon intensity, and road congestion. Regarding railway freight in particular, one policy tool that the Commission has emphasized for this purpose is the restructuring of the rail sectors of member countries through the creation of competition for the incumbents by new train-operating companies (TOC’s) – on its face a less obvious policy choice than alternatives such as Pigouvian pricing measures or infrastructure subsidies. This paper focuses on one important commodity group – grain – in three EC member states and one non-member state – Poland, the Czech Republic, Slovakia, and Ukraine – to examine the degree to which increased rail competition has been associated with increases in rail’s modal share, and more broadly to learn what appear to be the binding constraints to increases in rail’s share. Such constraints seem more closely related to shortages in infrastructure capacity than to a lack of competition among TOC’s. This suggests that other “models” of railway restructuring may be more effective in easing this constraint.
    JEL: L92 Q58 R11 R41 R42 R48
    Date: 2019–12
  10. By: Nicholas Economides (Professor of Economics, NYU Stern School of Business, New York, New York 10012); John Kwoka (Neal F. Finnegan Distinguished Professor of Economics, College of Social Sciences and Humanities, Northeastern University); Thomas Philippon (Max L. Heine Professor of Finance, NYU Stern School of Business, New York, New York 10012); Robert Seamans (Associate Professor of Management and Organizations, NYU Stern School of Business, New York, New York 10012); Hal Singer (Managing Director at Econ One, Adjunct Professor at Georgetown McDonough School of Business); Marshall Steinbaum (Assistant Professor, Economics Department, University of Utah); Lawrence J. White (Robert Kavesh Professor of Economics, NYU Stern School of Business, New York, New York 10012)
    Abstract: As economists with significant experience in competition, telecommunications, and regulatory matters, we have filed the attached brief in the case of State of New York v. Deutsche Telecom supporting the plaintiffs, who have sued to prevent the merger of T-Mobile and Sprint. We explain why the proposed merger of Sprint and T-Mobile and the elimination of Sprint as a competitor, even in the presence of the U.S. Department of Justice's proposed remedy (as embodied in the DOJ's Proposed Final Judgment), would predictably inflict serious antitrust injury on consumers and competition.
    Keywords: antitrust, telecommunications, merger, Sprint, T-Mobile, AT&T, Verizon, Dish, DOJ
    JEL: L1 L4 L5 L9
    Date: 2020–01
  11. By: Enriquez, Alejandra; Ramirez, Jose Carlos; Rosellon, Juan
    Abstract: Electricity prices have seen a consistent upward trend since the implementation of Mexico's electricity market reform (RME). This has been interpreted by some as a failure of the RME. In this paper we study the determinants of such price increases. We calculate the generation cost curve of the Federal Electricity Commission prior to the entry into force of the reform. We then construct daily data on average prices during the REM. We also finally study the relationship between prices and transmission congestion rents. Our main results indicate that the most profitable types of generation technology are the ones resulting from the RME. Likewise, price increases have taken place despite the existence of a considerably larger number of competitors in the generation sector. Lastly, the strong correlation between prices and congestion revenues is evidence that the increase in prices under the RME is mainly due to the growing congestion in the national electricity transmission network rather than due to an inefficient competitive market design in the generation sector.
    Keywords: Electric reform, electric generation, congestion rents, nodal prices, Mexico.
    JEL: D21 D4 D47 L50 L51 Q41
    Date: 2019
  12. By: AMENDOLA, Adalgiso (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); BARRA, Cristian (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); BOCCIA, Marinella (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); PAPACCIO, Anna (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: This paper investigates on the relationship between market structure and financial stability. More in details, considering the profit-oriented commercial banks and mutual cooperative banks, this work presents both a theoretical and an empirical approach in order to test the above relationship. As to the theoretical framework a case of imperfect mixed-Cournot competition between the two types of agents and a form of credit risk are considered. Moreover, to empirically explore the link between competition and financial stability the analysis employs a parametric approach using the ABI data allowing banks’ information from 1994 to 2015. The overall results show a negative trade-off between concentration and financial stability. However, this result, in the theoretical model, is strictly dependent on mutual cooperative banks’ presence in the market.
    Keywords: Market Structure; Bank’s Risk; Profitability; Financial Stability; U-shaped Relationship
    JEL: G21 L13
    Date: 2018–11–30
  13. By: Antoniou, Fabio; Fiocco, Raffaele
    Abstract: In a storable good market, we investigate a firm’s pricing policy and the welfare effects associated with the firm’s ability to commit to future prices in the presence of time-varying production costs. We show that, if costs are expected to increase, the firm’s lack of commitment leads to lower prices than full commitment when consumer storage costs are relatively small and demand is not too convex. This enhances consumer surplus and, under certain circumstances, total welfare. For intermediate consumer storage costs, the firm’s full commitment generally benefits consumers and, a fortiori, the whole economy. Our analysis provides potentially significant empirical and policy implications, especially regarding the patterns of cost pass-through rates.
    Keywords: commitment, consumer storage, cost variations, pass-through, storable goods.
    JEL: D21 D42 L12
    Date: 2020–01
  14. By: Sebastian Linde; Brandon Norton; Ralph Siebert
    Abstract: This paper provides insights into the determinants of bargaining power and how they affect drug prices. Our data show that drug prices vary across buyers and time periods. We estimate a structural bargaining model where drug suppliers and buyers engage in bilateral bargaining over drug prices. Our estimation results show that drug buyers hold, on average, 55% of the bargaining power. We also find that bargaining power can imply a range of drug prices. Differences in bargaining power explains large price heterogeneities across buyers, drug classes, and time periods. Additionally, of the drug price variation that is explained by bargaining power, differences across buyers rather than changes over time are more important. We examine buyer and seller characteristics that determine bargaining power and evaluate how changes in these bargaining power determinants affect bargaining power and prices. We find that transaction-specific determinants (such as transaction volume) and business relationships between buyers and sellers (such as buyer’s loyalty and multiple drug purchases from the same seller) exert the strongest effects on improving buyer bargaining power and reducing drug prices. For example, an 10% increase in transaction volume, buyer’s loyalty, and multiple drug purchases strengthens buyer’s bargaining power and results in a drug price reduction of 12%.
    Keywords: bargaining power, determinants of bargaining power, drug prices, drug price variation, business relationship between buyers and sellers
    JEL: L10
    Date: 2019
  15. By: Jingfeng Lu; Zongwei Lu; Christian Riis
    Abstract: We study collusion in a second price auction with two bidders in a dynamic environment. One bidder can make a take-it-or-leave-it collusion proposal, which consists of both an offer and a request of bribes, to the opponent. We show there always exists a robust equilibrium in which the collusion success probability is one. In the equilibrium, the interim expected payoff of the collusion initiator Pareto dominates the counterpart in any robust equilibria of the single-option model (Es\"{o} and Schummer (2004)) and any other separating equilibria in our model.
    Date: 2019–12
  16. By: Raouf Boucekkine (Aix-Marseille School of Economics [Aix-Marseille Université] - Centre de la Vieille Charité [Aix-Marseille Université] - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Carmen Camacho (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics); Benteng Zou ( - Université du Luxembourg)
    Abstract: In this paper, we tackle a generic optimal regime switching problem where the decision making process is not the same from a regime to another. Precisely, we consider a simple model of optimal switching from competition to cooperation. To this end, we solve a two- stage optimal control problem. In the first stage, two players engage in a dynamic game with a common state variable and one control for each player. We solve for open-loop strategies with a linear state equation and linear-quadratic payoffs. More importantly, the players may also consider the possibility to switch at finite time to a cooperative regime with the associated joint optimization of the sum of the individual payoffs. Using the- oretical analysis and numerical exercises, we study the optimal switching strategy from competition to cooperation. We also discuss the reverse switching.
    Keywords: Cooperation,competition,dynamic games,multi-stage optimal control
    Date: 2020–01
  17. By: Sonia Feliz; Chiara Maggi
    Abstract: This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms' entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of firm dynamics, which assume a constant elasticity of substitution, are inconsistent with the expansionary and heterogeneous response across incumbent firms. We show that in a model with heterogeneous firms and variable markups the most productive firms face a lower demand elasticity and expand their employment in response to increased entry.
    Date: 2019–12–13
  18. By: Petkov, Ivan
    Abstract: In this paper, I examine whether higher product market power can affect labor earnings through its effect on overall labor demand in distinct markets, as a set of dominant firms replaces employment by competitors. To identify relative labor demand shifts, I focus on variations in the spatial concentration within an industry following increases in market power.
    Keywords: Product Concentration, Labor Market Concentration, Local Labor Markets
    JEL: J0 J3 J6 L1
    Date: 2019–07–01
  19. By: Shiyuan Pan (Zhejiang University); Kai Xu (Zhejiang University); Kai Zhao (University of Connecticut)
    Abstract: We develop a two-sector growth model of vertical structure in which the up-stream sector features Cournot competition and produces intermediate goods that are used in the downstream sector for the production of final goods. In such a ver-tical structure, we show that deregulation and increased market competition in the upstream sector does not only increase its own productivity, but also has a substan-tial spill-over effect on the productivity of the downstream sector through affecting factor prices. We calibrate the model to the Chinese economy and use the calibrated model to quantitatively evaluate the extent to which deregulation in the upstream market in China from 1998 to 2007 accounts for the rapid economic growth over the same period. Our quantitative experiments suggest that deregulation in the up-stream market in China from 1998 to 2007 can account for a significant fraction of China’s economic growth during this period partly due to the significant spillover effect it has on the downstream sector. In addition, our model can also match sev-eral relevant observations in China during the same period including high and rising returns to capital, declining markups.
    Keywords: Deregulation; Economic Growth; Vertical Structure
    JEL: E20 O41
    Date: 2020–01
  20. By: Martijn Brons; Fotios Kalantzis; Lucia Vergano
    Abstract: This paper provides a comparative assessment of market functioning and market integration in EU Member States in network industries, i.e. telecommunications, energy and transport sectors. The first section assesses Member States’ progress in market opening and competition and highlights potential market distortions that can hinder the proper functioning of these markets. The analysis shows that over the last years overall improvements in the regulatory and competitive environment was achieved, especially in the telecommunications sector. However, additional efforts are needed, especially in some Member States. The second section empirically investigates whether any relevant price convergence across Member States took place in the EU network industries. Econometric results show that prices converged to the mean in all analysed subsectors. However, in some Member States country-specific factors prevented prices in each of the sectors from fully converging to the same level. The speed of convergence was higher in the transport and energy subsectors and lower in the telecommunications sector.
    JEL: C13 D47 L90
    Date: 2019–09
  21. By: Schmitz, Patrick W.
    Abstract: In the Grossman-Hart-Moore property rights theory, there are no frictions ex post (i.e., after non-contractible investments have been sunk). In contrast, in transaction cost economics ex-post frictions play a central role. In this note, we bring the property rights theory closer to transaction cost economics by allowing for ex-post moral hazard. As a consequence, central conclusions of the Grossman-Hart-Moore theory may be overturned. In particular, even though only party A has to make an investment decision, B-ownership can yield higher investment incentives. Moreover, ownership matters even when investments are fully relationship-specific (i.e., when they have no impact on the parties' disagreement payoffs).
    Keywords: incomplete contracts; ownership rights; investment incentives; relationship specificity; moral hazard
    JEL: D23 D86
    Date: 2020
  22. By: Wolfe, Michael (Duke University School of Law)
    Abstract: Timothy Wu’s book, The Curse of Bigness, offers a brief history on and critical perspective of antitrust law's development over the last century, calling for a return to a Brandeisian approach to the law. In this review-essay, I use Wu's text as a starting point to explore antitrust law’s current political moment. Tracing the dynamics at play in this debate and Wu’s role in it, I note areas underexplored in Wu’s text regarding the interplay of antitrust law with other forms of industrial regulation, highlighting in particular current difficulties in copyright law as one of the underlying tensions driving popular discontent with the major technology firms or “tech trusts.” I consider the continuing influence of Robert Bork’s The Antitrust Paradox, now more than forty years old, and how the current reform movement might execute a shift as lasting and substantial as the one Bork spearheaded with his book.
    Date: 2019–07–11
  23. By: Zacharias Bragoudakis (Bank of Greece and National and Kapodistrian University of Athens); Dimitrios Sideris (Bank of Greece and Panteion University)
    Abstract: The pricing mechanism in the gasoline market has often been the subject of public debate in Greece during the crisis years. Inefficient pricing could imply oligopolistic practices in the market and losses to consumers’ welfare in a period characterised by a dramatic fall in consumers’ income and standard of living. A way to test whether pricing is efficient in the market is by testing for asymmetries in the adjustment of domestic gasoline prices to world oil price changes. The present paper has two aims: (a) the first is to investigate the existence of asymmetric adjustment of gasoline prices to oil price variations in the Greek market, thus contributing to the relevant literature; (b) the second is to examine whether the structural reforms that took place in the gasoline market and the large fall in income, which characterise consumers’ behaviour in the recent period, had any impact on the pricing dynamics in the market. To this end, the analysis: (i) applies the TAR-ECM threshold cointegration technique, which assumes asymmetric adjustment towards the long-run equilibrium; (ii) makes use of observations at the highest frequency available; and (iii) uses the most recent data. The results provide evidence in favour of symmetric behaviour just for the crisis period. This may reflect competitive behaviour by suppliers who had to interact in a low demand environment and under a new institutional framework following the reforms, along with a change in consumers’ search behaviour who had to deal with a severe fall in their income.
    Keywords: Price asymmetry; Gasoline prices; Crude oil; Threshold cointegration.
    JEL: D43 Q41 Q43 Q48
    Date: 2019–12
  24. By: Chiara Fumagalli; Massimo 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. Keywords:Inefficient foreclosure, Tying, Scale economies, Network Externalities. JEL Codes: K21, L41
    Date: 2019
  25. By: Huffman, Max; Keele, Benjamin John (Indiana University)
    Abstract: 78 Antitrust Law Journal 105 (2012)
    Date: 2019–06–07
  26. By: Kyle F. Herkenhoff; Gajendran Raveendranathan
    Abstract: How are the welfare costs from monopoly distributed across U.S. households? We answer this question for the U.S. credit card industry, which is highly concentrated, charges interest rates that are 3.4 to 8.8 percentage points above perfectly competitive pricing, and has repeatedly lost antitrust lawsuits. We depart from existing competitive models by integrating oligopolistic lenders into a heterogeneous agent, defaultable debt framework. Our model accounts for 20 to 50 percent of the spreads observed in the data. Welfare gains from competitive reforms in the 1970s are equivalent to a one-time transfer worth between 0.24 and 1.66 percent of GDP. Along the transition path, 93 percent of individuals are better off. Poor households benefit from increased consumption smoothing, while rich households benefit from higher general equilibrium interest rates on savings. Transitioning from 1970 to 2016 levels of competition yields welfare gains equivalent to a one-time transfer worth between 1.87 and 3.20 percent of GDP. Lastly, homogeneous interest rate caps in 2016 deliver limited welfare gains.
    JEL: D14 D43 D60 E21 E44 G21
    Date: 2020–01
  27. By: Eric Lewis (U.S. Department of Justice); Randy Chugh (U.S. Department of Justice)
    Abstract: Starting with the pioneering work of Azar, Schmalz, and Tecu (2018), a rapidly growing body of empirical evidence on the effect of common ownership on market outcomes has emerged. However, testing the robustness of these results to alternative methods and data sources is just beginning. In this paper, we contribute to this growing body of work by comparing results based on two different data sources on institutional ownership: Thomson Reuters Spectrum (“SP”) and Thomson Reuters Ownership (“OP”). While SP is used by most researchers in this field, we find that OP has several distinct advantages including broader coverage and more convenient data formatting. We replicate the results of Azar, Schmalz, and Tecu (2018) and show that empirical results change dramatically when using OP instead of SP. We also find evidence that MHHI delta measures using OP data are more volatile than those using the SP data.
    JEL: D43 G23 G32 G34 L13
    Date: 2019–04

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