Antitrust & Competition Policy Blog

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

Friday, June 15, 2018

Regional Purchasing Groups and Hospital Medicine Prices: Evidence from Group Creations

Léa Toulemon (Hospinnomics (PSE - AP-HP), PSE - Paris School of Economics, Assistance Publique - Hôpitaux de Paris - Assistance publique - Hôpitaux de Paris (AP-HP)) explores Regional Purchasing Groups and Hospital Medicine Prices: Evidence from Group Creations.

ABSTRACT: This paper estimates the impact of group purchasing on medicine prices in French hospitals, taking advantage of the entry of hospitals into regional purchasing groups between 2009 and 2014. This paper uses a new database providing the average annual prices paid for all innovative and costly medicines in public hospitals. Using a fixed effects model that controls for hospitals' medicine-specific bargaining abilities and medicine-specific price trends, I find that group purchasing reduces prices of medicines in oligopoly markets, but has no impact on the prices of medicines with no competitors.

June 15, 2018 | Permalink | Comments (0)

Incentivizing Better Quality of Care: The Role of Medicaid and Competition in the Nursing Home Industry

Martin B. Hackmann is Incentivizing Better Quality of Care: The Role of Medicaid and Competition in the Nursing Home Industry.

ABSTRACT: This paper develops a model of the nursing home industry to investigate the quality effects of policies that either raise regulated reimbursement rates or increase local competition. Using data from Pennsylvania, I estimate the parameters of the model. The findings indicate that nursing homes increase the quality of care, measured by the number of skilled nurses per resident, by 8.8% following a universal 10% increase in Medicaid reimbursement rates. In contrast, I find that pro-competitive policies lead to only small increases in skilled nurse staffing ratios, suggesting that Medicaid increases are more cost effective in raising the quality of care.

June 15, 2018 | Permalink | Comments (0)

Job opening: Chief Economist, Commerce Commission of New Zealand

  •  Commerce Commission
  •  Wellington, New Zealand
  •  Public Sector
  •  3 weeks remaining
  • Expert competition economist

  • Member of Branch Leadership team

The Commerce Commission is New Zealand’s competition authority and economic regulator. The Competition Branch is responsible for enforcing laws relating to competition and consumer protection.

In the competition area, this includes merger control and trade practices (dominance, cartel and other anti-competitive conduct) regulation. The Branch also plays an educational role with businesses and consumers to enhance compliance with these laws.

Reporting to the General Manager, Competition and Consumer, this is an exciting opportunity for a talented Chief Economist to lead the Economics team, and be part of the broader Competition and Consumer Branch Leadership team.

You will contribute significantly to our organisational reputation, being visible and trusted in all relevant situations. Your ability to form and maintain strong relationships with internal and external stakeholders will be vital to your success in this role.

You will have expert knowledge and experience with all aspects of antitrust/competition economics, including managing expert testimony for cases and supervising more junior economists. You may also have experience with other aspects of micro-economics and industrial organisation, as well as, econometrics or behavioural economics.

Your core strengths will include the following:

  • Expert experience in the application of competition/antitrust economics to merger control
  • Being a sophisticated economic adviser and thought leader – with an ability to provide strategic steers and to manage a team working across the full range of antitrust issues affecting markets
  • Leading and developing a team of expert competition economists
  • Having excellent judgement in handling complex competition and consumer issues
  • Providing strategic leadership across a multi-disciplinary group with diverse functions
  • Having highly effective relationship management ability at the most senior levels in the private or public sector

To find out more about this opportunity and to view a copy of the position description, click on the link below or visit: http://www.comcom.govt.nz/the-commission/careers/vacancies/

For further information you can also contact Janet Rees on 04 924 3719.

To apply for this position please send a copy of your CV and a covering letter to work@comcom.govt.nz

Applications close 5pm Thursday, 5 July 2018.

June 15, 2018 | Permalink | Comments (0)

Alden Abbott ABA Q&A

See here.

June 15, 2018 | Permalink | Comments (0)

Competing Sales Channels

David Ronayne and Greg Taylor explore Competing Sales Channels.

ABSTRACT: We study strategic interactions in a market where producers sell to consumers directly as well as via a competitive channel (CC) such as an online marketplace or price comparison website. We show how the size of the competitive channel can influence market outcomes. Equilibrium falls into one of two regimes: either the CC charges low commission and accommodates producers, or it charges high commission and faces strong competition from producers' direct sales channel. Seemingly procompetitive developments that increase the number of prices consumers check can raise prices and reduce consumer surplus. We also use the model to study an active policy issue concerning which channels should be allowed to utilize data about consumers' past purchases.

June 15, 2018 | Permalink | Comments (0)

Thursday, June 14, 2018

Local market structure and consumer prices: Evidence from a retail merger

Rickert, Dennis ; Schain, Jan Philip ; Stiebale, Joel investigate Local market structure and consumer prices: Evidence from a retail merger.

ABSTRACT: This paper analyzes the effects of a merger between a German supermarket chain and a soft discounter on consumer prices. We exploit geographic variation in prices within retail chains and brands and use a difference-in-differences estimator to compare regional markets with a change in market structure to a control group in unaffected markets. Our results indicate that both insiders and outsiders raised average prices after the merger, particularly in regions with high expected change in retail concentration. In contrast, we estimate price declines in regions that did not experience a rise in concentration but were potentially affected by cost savings within the merged entity. We also provide evidence that remedies imposed by competition authorities were not sufficient to o set anti-competitive effects.

June 14, 2018 | Permalink | Comments (0)

A Note on the Desirability of the Supply Function Competition with Demand Uncertainty

Ismael Saglam offers A Note on the Desirability of the Supply Function Competition with Demand Uncertainty.

ABSTRACT: In this paper, we formalize a prediction of Klemperer and Meyer (1989) as to the possibility that in the presence of demand uncertainty the expected profits under the supply function competition may result in higher expected oligopoly profits than under the stochastic Cournot competition and investigate how this possibility is affected by certain attributes of the oligopolistic industry, such as the number of firms, the cost of producing a unit output, and the slope of the demand curve.

June 14, 2018 | Permalink | Comments (0)

On supply function competition in a mixed oligopoly

Gutiérrez-Hita, Carlos and Vicente-Pérez, José provide thoughts On supply function competition in a mixed oligopoly.

ABSTRACT: In this paper we present a mixed duopoly model of supply function competition under uncertainty with product differentiation. We find that, regardless the nature of product heterogeneity, the best response of the private firm always arises as strategic complement. Contrary to this, state-owned firm's best response arises either as strategic complement or substitute depending on the product heterogeneity. As a result of the ex post realization of the demand uncertainty, different equilibria are reached.

June 14, 2018 | Permalink | Comments (0)

Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects

Andreea Cosnita-Langlais ; Bjørn Olav Johansen ; and Lars Sorgard study Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects.

ABSTRACT: In two-sided markets it is important to consider feedback effects following a merger, i.e. how a price change on one side of the market affects the price change on the other side of the market. Affeldt et al. (2013) introduced the Upward Pricing Pressure (UPP) for two-sided markets, and we extend their approach to take into account such feedback effects. We then discuss the implications of our results for the assessment of two-sided mergers.

June 14, 2018 | Permalink | Comments (0)

Wednesday, June 13, 2018

Assistant Attorney General Makan Delrahim Delivers Remarks at the National Music Publishers Association Annual Meeting New York, NY ~ Wednesday, June 13, 2018

See the speech here.

Excerpts:

Antitrust enforcement by the Department of Justice has also resulted in a form of industry regulation. In the 1930s, the Antitrust Division became concerned about the competitive effects of exclusive blanket licenses, and it sued ASCAP under the antitrust laws. In 1941, ASCAP settled that lawsuit, and BMI entered into a separate, but similar settlement. The resulting consent decrees, with some modifications over the years, still regulate most aspects of public performance licensing today, more than 75 years later.

...

In fact, the ASCAP and BMI consent decrees are among 1300 legacy judgments the Antitrust Division has on the books. As some of you are aware, the Antitrust Division has recently set out to review many of those longstanding judgments to make sure they’re not doing more harm than good. 

Some of those longstanding decrees are remarkably out of date, like the decree for the Horseshoer’s National Protective Association judgment from 1913. In fact, we will soon be moving to eliminate dozens of out of date decrees from the books through our Judgment Termination Initiative.  

Though they’re old, the ASCAP and BMI decrees were not among that first group that we’ve sought to examine. We recognize the industry has grown up around them, and we should not take any action lightly or without due care and consideration. Unlike the Horseshoer’s National Protective Association, I am pleased to note that ASCAP and BMI still exist and remain very relevant.  

...

To be clear, the Antitrust Division has not reached any conclusion about whether the ASCAP and BMI decrees strike the best balance among competition, innovation, and regulation. Congress, moreover, is also paying proper attention to the industry. It is taking a hard look at the Music Modernization Act, and we look forward to seeing that legislation enacted and the results of those changes, which have involved several years of process and input from various interested parties. 

June 13, 2018 | Permalink | Comments (0)

Mergers, investments and demand expansion

Bourreau, Marc and Jullien, Bruno theorize about Mergers, investments and demand expansion.

ABSTRACT: In this paper, we study the impact of a merger to monopoly on prices and investments. Two single-product firms compete in prices and coverage for a new technology. In equilibrium, one firm covers a larger territory than its competitor with the new technology, leading to singleproduct and multi-product zones, and sets a higher uniform price. If the firms merge, the merged entity can set different prices and coverage for the two products. We find that the merger raises prices and total coverage, but reduces the coverage of the multi-product zone. We also show that the merger can increase total welfare and consumer welfare.

June 13, 2018 | Permalink | Comments (0)

The Effects of Entry in Oligopolistic Trade with Bargained Input Price

Naylor, Robin (University of Warwick) and Soegaard, Christian (University of Warwic) analyze The Effects of Entry in Oligopolistic Trade with Bargained Input Price.

ABSTRACT: Firms which face the threat of import competition from foreign rivals are conventionally seen as favouring import protection. We show that this is not necessarily the case when domestic firms' input prices are determined endogenously. In a framework where the input price is determined through bargaining with an (upstream) input supplier, the relationship between a domestic (downstream) firm's profits and the number of foreign competitors depends on trade costs. If trade costs are sufficiently high, then an increase in the number of foreign entrants can raise the profits of a downstream firm in a home market characterised by Cournot competition. The intuition for this result is that increased product market competition through the entry of foreign firms is mirrored by profit-enhancing moderation of the bargained input price. We examine a number of tariff and non-tariff barriers to international trade and identify conditions under which import-competing firms will favour the removal of barriers to foreign competition.

June 13, 2018 | Permalink | Comments (0)

Acting Deputy Assistant Attorney General Richard A. Powers Delivers Remarks at the Organisation for Economic Co-operation and Development (OECD) Paris,France ~ Tuesday, June 5, 2018

See here for the speech.

Highlights:

From the outset, we can increase our cooperation and our shared commitment to coordinating, where and to the extent possible, to decrease burdens on applicants. My predecessors—including Brent Snyder, who is speaking here today—have had some great ideas on practical ways to accomplish these goals. 

For example, when leniency applicants raise these issues with us, we can: 1) try to coordinate timelines and deadlines to allow the applicant to meet them in multiple jurisdictions; 2) tailor our document demands to get the necessary evidence from the leniency applicant without unnecessary burden; and 3) where possible, coordinate the timing and locations of interviews to alleviate burdens on applicants and employees.

We look forward to furthering this mission by first engaging with foreign enforcers, and also the defense bar, to examine possible ways to reduce unnecessary burdens on leniency applicants. I welcome your thoughts and ideas, and look forward to an open, productive dialogue on these issues. 

...

While we are mindful of the concerns we have heard, we do not agree with the notion that the benefits of leniency are not sufficient to induce self-reporting. Where some may argue that the carrot is not as effective because of some of the issues raised here today, the stick has not changed. 

 

 

June 13, 2018 | Permalink | Comments (0)

Evaluation of best price clauses in online hotel booking

Hunold, Matthias ; Kesler, Reinhold ; Laitenberger, Ulrich ; Schlütter, Frank offer an Evaluation of best price clauses in online hotel booking.

ABSTRACT: We analyze the best price clauses (BPCs) of online travel agents (OTAs) using meta-search price data of nearly 30,000 hotels in different countries. We find that BPCs influence the pricing and availability of hotel rooms across online sales channels. In particular, hotels publish their offers more often at Booking.com when it does not use the narrow BPC, and also tend to promote the direct online channel more actively. Moreover, the abolition of Booking.com's narrow BPC is associated with the direct channel of chain hotels having the strictly lowest price more often.

June 13, 2018 | Permalink | Comments (0)

Pass-Through of Input Cost Shocks Under Imperfect Competition: Evidence from the U.S. Fracking Boom

Erich Muehlegger and Richard L. Sweeney address Pass-Through of Input Cost Shocks Under Imperfect Competition: Evidence from the U.S. Fracking Boom.

ABSTRACT: The advent of hydraulic fracturing lead to a dramatic increase in US oil production. Due to regulatory, shipping and processing constraints, this sudden surge in domestic drilling caused an unprecedented divergence in crude acquisition costs across US refineries. We take advantage of this exogenous shock to input costs to study the nature of competition and the incidence of cost changes in this important industry. We begin by estimating the extent to which US refining’s divergence from global crude markets was passed on to consumers. Using rich microdata, we are able to decompose the effects of firm-specific, market-specific and industry-wide cost shocks on refined product prices. We show that this distinction has important economic and econometric significance, and discuss the implications for prospective policy which would put a price on carbon emissions. The implications of these results for perennial questions about competition in the refining industry are also discussed.

June 13, 2018 | Permalink | Comments (0)

Tuesday, June 12, 2018

Assistant Attorney General Makan Delrahim Delivers Remarks at the Open Markets Institute Event: Antitrust and the News Washington, DC ~ Tuesday, June 12, 2018

See here for the speech. Excerpts are below:

Today’s conference focuses on online and media industries, and the impacts on our democratic dialogue of changes in those spaces. Of course, in America we want institutions that make our democracy strong—that seems like a no brainer. So as one line of thinking goes, antitrust enforcers should step beyond consumer welfare and think about what would be good or bad for our democracy, or for values like the free speech the First Amendment protects. The suggestion is that perhaps enforcers should broaden the consumer welfare lens to think about effects on democracy or expression.
I’d like to focus my remarks today on two responses to that suggestion. First, we shouldn’t go down that road, because enforcement actions purportedly aimed at supporting our democracy carry too great a risk of inadvertently undermining our constitutional values. Second, we don’t need to go beyond the consumer welfare standard, because it can get the job done on its own. Allow me to take those one at a time.
The first point is that there are serious risks to democracy in abandoning the consumer welfare standard.

...

That risk in antitrust enforcement is significant. Enforcement decisions targeting democratic ends would invite a self-defeating exercise of prosecutorial subjectivity. Republican and Democrat prosecutors, or those of any party or political orientation, carry with them their own perceptions of what is good and bad for our democracy and for society at large. The Constitution insists they set those views aside in exercising their prosecutorial discretion, not embrace them as rules of decision. 
As the Supreme Court explained in its 1963 Philadelphia National Bank decision, antitrust enforcers aren’t tasked with some “ultimate reckoning of social or economic debits and credits,” but rather Congress has focused us on preserving our competitive economy. By giving us focus, the consumer welfare standard reduces the risk of what Brandeis called “dangers to liberty” from well-meaning enforcers.  

...

Next, allow me to address why I think our current standard is up to the task. 
First of all, even when applying a consumer welfare standard, antitrust enforcement can benefit our democracy and support media markets conducive to discourse. The competitive economy the consumer welfare standard is designed to protect supports those goals.

...

To frame it in economic terms, a consumer welfare standard that focuses liability determinations on harms to competition and consumers creates positive externalities for American democracy. 

June 12, 2018 | Permalink | Comments (0)

Pricing in a Frictional Product Market

Leena Rudanko (Federal Reserve Bank of Philadelphia) offers Pricing in a Frictional Product Market.

ABSTRACT: Recent research argues that a key factor limiting firm growth is the gradual accumulation of product market demand. Motivated by this evidence, this paper studies firm price setting and growth in a frictional product market where firms accumulate customers over time. In this competitive search model of firm growth, firms face a trade-off in setting prices each period, between making profits on existing customers with high prices, and attracting new customers with low prices. Firms with more existing customers choose higher prices, attract fewer new customers, and grow more slowly, than those with less. I show that if a new firm has full commitment to future prices, it can attain efficient growth through its lifetime. This plan is not time consistent, however: if a firm with existing customers reoptimizes, it will choose a higher price today than planned. I study firm pricing and growth when the firm does not have commitment to future prices, focusing on Markov perfect equilibria. The baseline model considers an industry with a single monopolistically competitive firm, but I also consider the impact of a competitive fringe on the monopolist’s pricing, a version with a continuum of firms within the industry that delivers an equilibrium theory of price dispersion, as well as the implications for firm responses to shocks to demand and costs.

June 12, 2018 | Permalink | Comments (0)

The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory

Ernst R. Berndt and Mark R. Trusheim discuss The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory.

ABSTRACT: Precision medicines inherently fragment treatment populations, generating small-population markets, creating high-priced "niche busters" rather than broadly prescribed "blockbusters". It is plausible to expect that small markets will attract limited entry in which a small number of interdependent differentiated product oligopolists will compete, each possessing market power. Multiple precision medicine market situations now resemble game theory constructs such as the prisoners' dilemma and Bertrand competition. The examples often involve drug developer choices created by setting the cut-off value for the companion diagnostics to define the precision medicine market niches and their payoffs. Precision medicine game situations may also involve payers and patients who attempt to change the game to their advantage or whose induced behaviors alter the payoffs for the developers. The variety of games may predictably array themselves across the lifecycle of each precision medicine indication niche and so may become linked into a sequentially evolving meta-game. We hypothesize that certain precision medicine areas such as inflammatory diseases are becoming complex simultaneous multi-games in which distinct precision medicine niches compete. Those players that learn the most rapidly and apply those learnings the most asymmetrically will be advantaged in this ongoing information pharms race.

June 12, 2018 | Permalink | Comments (0)

Effects of globalizing a consumer-friendly firm into an asymmetric mixed duopoly

Leal, Mariel ; Garcia, Arturo and Lee, Sang-Ho explore the Effects of globalizing a consumer-friendly firm into an asymmetric mixed duopoly.

ABSTRACT: We study the effects of uniting two separated markets, each monopolized by a producer, into a single globalized duopoly market. When one of the firms is consumer-friendly before and after globalization, we examine certain conditions under which globalization turns out to be beneficial. Consumers in the local market which the consumer-friendly firm is from may have their surplus reduced under certain conditions. We also find conditions under which welfare of one market or the other can be reduced, even that of both simultaneously. If these conditions were met, it would be better, in a globalizing context, that the firm is friendly only with the consumers of its original market and not with those of the global market.

June 12, 2018 | Permalink | Comments (0)

Dynamic Vertical Foreclosure

Fumagalli, Chiara and Motta, Massimo analyze Dynamic Vertical Foreclosure.

ABSTRACT: This paper shows that vertical foreclosure can have a dynamic rationale. By refusing to supply an efficient downstream rival, a vertically integrated incumbent sacrifices current profits but can exclude the rival by depriving it of the critical profits (or sales) it needs to be successful. In turn, monopolising the downstream market may prevent the incumbent from losing its future profits because: (a) it allows the incumbent to extract rents from an efficient upstream rival if future upstream entry cannot be discouraged; or (b) it also deters future upstream entry by weakening competition for the input and reducing the post-entry profits of the prospective upstream competitor.

June 12, 2018 | Permalink | Comments (0)