Long Live OPTA!

Although explicitly installed as a transitory body, the Dutch telecommunication controller OPTA displays the typical signs of government institutions that seek to become indispensable. A conflict in OPTA''s two main policy objectives – guarding consumer prices through controlling the network operator and encouraging entry into the telecommunication market – hinders OPTA in making itself redundant. It is shown that a market structure with a dominant owner of the network and a few fringe firms, among which OPTA referees for ever, is a stable Nash equilibrium. Some possible remedies for this undesirable state of affairs are discussed. Long live OPTA, but leaner and meaner, supervising a symmetrically competing market.Economics ;

Estonia’s Competition Policy: A Critical Evaluation towards EU accession.

This paper sets out to answer two questions: to what extend is competition policy in Estonia - one of the applicant countries for accession to the European Union - a duplication of EU policy, and has Estonia established a true competition discipline with high public awareness of the rules and effective public and private enforcement? It is shown that although Estonian antitrust policy includes some additional features to the core EU rules - both with possible positive and negative welfare consequences - one can basically really speak of a copy of EU policy both with respect to legislation and enforcement provisions. Since the EU has a long and successful tradition of fighting competition-distorting conduct, this should weigh positively in the country''s application for accession. However, a real competition discipline is still lacking in Estonia. Higher public awareness, as well as a more stringent enforcement and especially sanctioning policy are necessary.Economics ;

Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing

Basing-point pricing is known to have been abused by geographically dispersed firms in order to eliminate competition on transportation costs. This paper develops a topographic test for collusive basing-point pricing. The method uses transaction data (prices, quantities) and customer project site locations to recover the basing-point(s) from which delivered prices were calculated. These bases are compared to the locations of the production mills in a test that discriminates between competitive and collusive basing-point pricing. We define a measure for the likelihood of collusion that can be used to screen industries that traditionally apply delivered pricing for the presence of cartels. We operationalize this screen with a software. The test is hard to beat for cartels using this otherwise elusive form of price-fixing. When a cartel was found to have abused the basing-point system, our method can be used to estimate antitrust damages

Illinois Walls

In its landmark ruling in Illinois Brick Co. v. Illinois, the U.S. Supreme Court restricted the right to sue for private damages from violations of section 4 of the Clayton Act to direct purchasers. Despite the fact that typically antitrust injury is, at least in part, passed on to firms lower in the production chain and ultimately to consumers, Illinois Brick has since stood as a binding legal constraint. This paper considers the strategic use that upstream firms can make of Illinois Brick to shield themselves from private damages claims. In a repeated game setting, we find that Illinois Brick may facilitate upstream firms in engaging tacitly in collusive arrangements with concealed side-payments to discourage their direct purchasers from filing suit. An example is given of such an ‘Illinois Wall’, in which downstream firms are given part of the upstream cartel profits through a symmetric rationing of their inputs at low prices. Interestingly enough, the Illinois Wall is found to be particularly stable when competition is relatively strong at both the up- and the downstream level.microeconomics ;

European antitrust policy 1957–2004 : an analysis of commission decisions

This paper provides a survey of European antitrust law enforcement since its foundation in the Treaty of Rome of 1957 up to and including 2004. We present a complete overview and statistical analysis of all 538 formal Commission decisions under Articles 81, 82, and 86 of the European Community Treaty. We report a range of summary statistics concerning report route, investigation duration, length of the decision, decision type, imposed fines, number of parties, sector classification, nationality, and Commissioner and Director General responsible. The statistics are linked to changes in legislation and administrative implementation, thereby providing an historical overview that summarizes the Commission’s work in the area of antitrust. One or more appeals were filed with respect to 161 of the 538 decisions. We estimate the determinants of the size of the imposed fine and probability of appeal when an infringement has been found

Intertemporal Market Divison

In dynamic entry-and-exit models, common understanding is that potential entrants will enter into the market up to the point where all excess profits are eroded. Dominant incumbent positions are possible only under specific circumstances, such as the presence of substantial barriers to entry, or when incumbents can credibly threaten to punish rivals with losses upon entry. In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor punishment strategies. this equilibrium induces an alternating monopoly - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, an alternating monopoly reveals itself rather quickly. Moreover, the alternating monopoly equilibrium Pareto dominates the Cournot equilibrium - as it is close to the cartel outcom.microeconomics ;