Three Essays in Competition and Consumer Policy.

The thesis is made up of three chapters: The first chapter estimates the effects of antitrust investigations on the market value of the investigated firms. This analysis offers insights on the performance of competition policy and its enforcement. The interest is on investigations carried out by the Italian Competition Authority between 1991 and 2007. We find that the start of the investigation is associated with an average drop of 0.6% in the market value of investigated firms and a later infringement decision implies an average drop of 1%. The event associated with the highest impact is the decision of the last Court of Appeal. When the last Court upholds the Authority's infringement decision the market value of firms drops between 3% and 6%. Interestingly, there is no effect when the last Court annuls the Authority's decision. The second and third chapters study the effects, on retail fuel prices, of a price comparison policy (a typical consumer policy intervention) introduced in the Italian pay-toll highways refueling market. In particular, the second chapter performs an empirical analysis while the third chapter presents an agent based computational economic (ACE) model, which aims to rationalize the empirical evidence and to inform the policy design. Differently from what was expected (by policy makers and consumers associations), the empirical analysis finds that the price comparison policy is associated with a small, but statistically significant, increase in the average price of fuel (0.55 euro cents per liter). Nevertheless, despite this average increase in fuel prices, the policy might help (active) consumers make informed choices and save around 1 euro cent per liter. The ACE model predicts that the introduction of price comparison has a limited effect on market prices as price competition among retailers is only marginally fostered. In addition, the model suggests that consumers that make use of price comparison might save around 0.5 euro cents per liter. These results are consistent with the empirical findings in suggesting that the price comparison policy had a limited impact on fuel retail prices and the overall effect on consumers is mixed.

Ex-post Merger Evaluation in the UK Retail Market for Books

This paper empirically evaluates the price effects of the merger of two major book retail chains in the UK: Waterstone’s and Ottakar’s. We employ differences-in-differences techniques and use a rich dataset containing monthly scanner data information on a sample of 200 books sold in 60 stores in 50 different local markets for a period of four years around the merger. Since retail mergers may have either local or national effects (or both) according to the level at which retail chains set prices, we undertake an ex-post assessment of the impact of the merger at both levels. At the local level, we compare the changes in the average price charged before and after the merger in the shops located in overlap areas –i.e. areas where both chains were present before the merger– and in non-overlap areas –i.e. areas where only one chain was present before the merger. At the national level, we employ two distinct control groups to evaluate the merger, namely the competitors and the top-selling titles. We find that the merger did not result in an increase in prices either at the local or at the national level. We also perform heterogeneous treatment effects estimations in order to assess whether the effect of the merger differs along various dimensions of heterogeneity that are present in our data

They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market

We study the effect of a merger in a dynamic high-technology industry–the videogame market– which is characterized by frequent introduction of new products. To assess the impact of the merger between two large specialist retailers in the UK, we perform a difference-in-differences analysis comparing the price evolution of the merging parties to that of their 7 major competitors on an original sample of 196 videogames belonging to six different consoles. The results of our econometric analyses suggest that there has been a reduction in the general level of prices of both new and pre-owned games after the merger. This decline has been more marked for the merging parties, which suggests that the merger between Game and Gamestation did not lead to a substantial lessening of competition; rather it is consistent with the existence of efficiency gains

Three Essays in Competition and Consumer Policy

Defence date: 3 October 2011Examining Board: Professor Pascal Courty, University of Victoria, Canada, Supervisor Professor Luigi Guiso, European University Institute Professor Giorgio Fagiolo, Sant’Anna School of Advanced Studies Professor Saul Lach, The Hebrew UniversityThe thesis is made up of three chapters: The first chapter estimates the effects of antitrust investigations on the market value of the investigated firms. This analysis offers insights on the performance of competition policy and its enforcement. The interest is on investigations carried out by the Italian Competition Authority between 1991 and 2007. We find that the start of the investigation is associated with an average drop of 0.6% in the market value of investigated firms and a later infringement decision implies an average drop of 1%. The event associated with the highest impact is the decision of the last Court of Appeal. When the last Court upholds the Authority's infringement decision the market value of firms drops between 3% and 6%. Interestingly, there is no effect when the last Court annuls the Authority's decision. The second and third chapters study the effects, on retail fuel prices, of a price comparison policy (a typical consumer policy intervention) introduced in the Italian pay-toll highways refueling market. In particular, the second chapter performs an empirical analysis while the third chapter presents an agent based computational economic (ACE) model, which aims to rationalize the empirical evidence and to inform the policy design. Differently from what was expected (by policy makers and consumers associations), the empirical analysis finds that the price comparison policy is associated with a small, but statistically significant, increase in the average price of fuel (0.55 euro cents per liter). Nevertheless, despite this average increase in fuel prices, the policy might help (active) consumers make informed choices and save around 1 euro cent per liter. The ACE model predicts that the introduction of price comparison has a limited effect on market prices as price competition among retailers is only marginally fostered. In addition, the model suggests that consumers that make use of price comparison might save around 0.5 euro cents per liter. These results are consistent with the empirical findings in suggesting that the price comparison policy had a limited impact on fuel retail prices and the overall effect on consumers is mixed

Ex post Merger Evaluation in the U.K. Retail Market for Books

This paper evaluates the price effects of the merger of two major U.K. book retailers. We use a dataset containing monthly scanner data on a sample of 200 books in 50 local markets for four years around the merger. We compare the price changes after the merger in shops located in areas where both chains were present before the merger and in areas where only one chain was present. We also investigate the country-wide effect of the merger. We find that the merger did not result in any price increase either at the local or at the national level

Ex-post Analysis of Mobile Telecom Mergers: The Case of Austria and The Netherlands

textabstractRecently there has been an increased attention towards the ex-post evaluation of competition policy enforcement decisions and in particular merger decisions. In this paper we study the effects of two mobile telecommunication mergers on prices. We apply a standard difference-in-differences approach which is widely used in the literature on ex-post evaluation of mergers. For the Austrian T-Mobile/tele.ring merger, we conclude that after the acquisition (for which remedies were imposed) prices in Austria did not increase relative to the considered control countries. For the Dutch T-Mobile/Orange merger, we observe an increase in the mobile tariff prices in the Netherlands in the analysed period, relative to the control countries. We cannot firmly establish whether this price increase was exclusively caused by the T-Mobile/Orange merger or in part by possible price effects brought about by the KPN/Telfort merger consummated two years earlier in the Netherlands. However, we believe that such price increase could be linked to the structural changes brought by both KPN/Telfort and T-Mobile/Orange mergers together