Search results for: Keyword=K21 [9]

2018
Competition Policy and Sector-Specific Regulation in the Financial Sector
2018/07
Max Planck Institute for Research on Collective Goods
Bonn
2018
Abstract
Reforms of financial regulation after the crisis of 2007-2009 raise the question of what is the relation between financial regulators and competition authorities. Should competition authorities play a role in financial regulation? Should they co-operate with financial regulators? Or should they keep at a distance? The paper gives an overview over some of the issues that are involved in the discussion. Drawing on the experience of the network industries, the first part of the paper discusses the relation between competition authorities and sector-specific regulators more generally. Whereas competition policy involves the application of legal norms involving prohibitions that are formulated in abstract terms, sector-specific regulation involves authorities actually prescribing desired modes of behavior. The ongoing nature of relations makes regulators more prone to capture than competition authorities. In the financial sector, the potential for capture is particularly great because everyone is tempted by the idea that banks should fund their pet projects. Following an overview over the evolution of regulation and competition in the financial industry, the paper discusses various issues that are relevant for competition policy: Technological and regulatory barriers to entry, distortions of competition by explicit or implicit government guarantees, distortions of competition by bailouts making for artificial barriers to exit. Guarantees and bailouts in particular pose special challenges for merger control and for state aid control.
Debarment and Collusion in Procurement Auctions
2018/05
Max Planck Institute for Research on Collective Goods
Bonn
2018
Abstract
This paper explores the impact of debarment as a deterrent of collusion in first-price procurement auctions. We develop a procurement auction model where bidders can form bidding rings, and derive the bidding and collusive behavior under no sanction, debarment and fines. The model's predictions are tested through a lab experiment. We find that debarment and fines both reduce collusion and bids. The deterrent effect of debarment increases in its length. However, the debarment of colluding bidders reduces effciency and increases the bids of non-debarred bidders. The latter suggests that the market size reduction resulting from debarment may trigger tacit collusion.
2007
Competition in a Pure World of Internet Telephony
2007/01
Max Planck Institute for Research on Collective Goods
Bonn
2007
Abstract
From the angle of competition policy, Voice over IP looks like a panacea. It not only brings better service, but it also increases competitive pressure on former telecommunications monopolists. This paper points to the largely overlooked downside. In a pure world of Internet telephony, there would be no charge for individual calls, nor for telephony, as distinct from other services running over the uniform network. Specifically, establishing property rights for either of these would be costly, whereas these property rights were automatic and free of charge in switched telephony. Giving voice over IP providers classic telephone numbers would enhance systems competition with switched telephony. But this would make it more difficult for clients to swap providers. The anti-competitive caller pays principle would extend to IP telephony.
Competition in a Pure World of Internet Telephony
Telecommunications Policy
31
530-540
2007
Die verfassungsrechtliche Zulässigkeit eines Entflechtungstatbestandes im Gesetz gegen Wettbewerbsbeschränkungen als ultima ratio zur Beseitigung eines Wettbewerbsversagens
2007/22
Max Planck Institute for Research on Collective Goods
Bonn
2007
Abstract
Triggered by the concentration process in the electricity and gas markets, the land of Hesse proposes to give the German cartel office power to divest dominant firms or oligopolies if this is necessary to restore competition. The paper shows that the reform would be in line with constitutional law, and with freedom of property in particular. Depending on how divestiture is brought about, it would interfere with this basic freedom. It would however not amount to taking. In practice, the main effect would be through bargaining between the divested company and the cartel office. This poses problems under rule of law, but these problems are not insurmountable. The main justification for the reform is the almost total failure of interventions to combat the abuse of dominant positions. In the US, divestiture has not always been successful. But close scrutiny of the American experiences demonstrates that the tool is sufficiently effective to meet the constitutional standard. If divestiture is brought about by forcing the firm to sell entities or assets, the necessary compensation comes from the price it receives from the buyer.
Incentives for Process Innovation in a Collusive Duopoly
2007/06
Max Planck Institute for Research on Collective Goods
Bonn
2007
Abstract
Two suppliers of a homogenous good know that, in the second period, they will be able to collude. Gains from collusion are split according to the Nash bargaining solution. In the first period, either of them is able to invest into process innovation. Innovation changes the status quo pay-off, and thereby affects the distribution of the gains from collusion. The resulting innovation incentive is strictly smaller than in the competitive case.
Tacit Collusion. The Neglected Experimental Evidence
2007/14
Max Planck Institute for Research on Collective Goods
Bonn
2007
Abstract
Both in the US and in Europe, antitrust authorities prohibit merger not only if the merged entity, in and of itself, is no longer sufficiently controlled by competition. The authorities also intervene if, post merger, the market structure has changed such that "tacit collusion" becomes disturbingly more likely. It seems that antitrust neglects the fact that, for more than 50 years, economists have been doing experiments on this very question. Almost any conceivable determinant of higher or lower collusion has been tested. This paper standardises the evidence by way of a meta-study, and relates experimental findings as closely as possible to antitrust doctrine.
2006
How Much Collusion? A Meta-Analysis On Oligopoly Experiments
2006/27
Max Planck Institute for Research on Collective Goods
Bonn
2006
Abstract
Oligopoly has been among the first topics in the experimental economics. Over half a century, some 150 papers have been published. Each individual paper was interested in demonstrating one effect. But in order to do so, experimenters had to specify many more parameters. That way they have generated a huge body of evidence, untapped thus far. This meta-analysis makes this evidence available. More than 100 of the papers lend themselves to calculating an index of collusion. The data bank behind this paper covers some 500 different settings. The experimental results may be normalised as a percentage of the span between the Walrasian and the Pareto outcomes. The same way, results may be expressed as a percentage of the distance between the Nash and the Pareto outcomes. For each and every of the parameters, these two indices make it possible to answer two questions: how far is the market outcome away from the competitive equilibrium? And how good is the Nash prediction? Most importantly, however, the meta-analysis sheds light on how features of the experimental setting interact with each other. Most main effects and many interaction effects are indeed statistically significant.
Private Damage Claims and the Passing-On Defense in Horizontal Price-Fixing Cases: An Economist's Perspective
2006/22
Max Planck Institute for Research on Collective Goods
Bonn
2006
Abstract
The paper studies the assessment of private damages that the cartelization of a market imposes on buyers in that market and, possibly, on the buyers' own customers in further market downstream. Abstracting from procedural problems and focussing on conceptual issues, the paper argues that damages comprise not just the overcharge on the actual quantity purchased, but also foregone profits on the units that are not purchased because the cartel price is higher than the competitive price. The paper also argues that the passing-on defense against claims by direct buyers is flawed because it neglects the business loss effect that is associated with a direct buyer's raising his own price to pass the higher cartel price on to his own customers. If direct buyers are not in competition with each other, a revealed-preference argument shows that the business loss effect on the direct buyer's profits is necessarily greater than the effect of the increase in revenues per unit that is sold. The overcharge on the actual quantity purchased again is a lower bound for actual damages. The assessment of damages suffered by indirect buyers is independent of this refutation of the passing-on defense. If direct buyers are in competition with each other, there is an additional business gain effect because the cartelization upstream raises rivals' costs and thereby affects the competition between the direct buyers. In this case, the assessment of damages depends on the treatment of causation i.e., to what extent a direct buyer's competitors' price increases are ascribed to the cartelization upstream. Consistency requires that, for claims raised at the level of direct and indirect buyers alike, the same treatment of causation should be used. Either the cartel members should be held responsible for the entire shift in the equilibrium of the strategic game between direct buyers in suits involving indirect buyers, as well as direct buyers, or a ceteris paribus assumption should be applied to the actions of a direct buyer's competitors, which eliminates the business gain effect resulting from their price increases. In the latter treatment, which seems conceptually and procedurally the simplest, the overcharge on the actual quantity purchased is again a lower bound for actual damages.