Communication in cartelized industries

In this article we first survey both the European Commission’s legal standard and economic theory on communication in industries in which a cartel is operating. We notice a strong tension between the per se illegal nature of communication on price and price fixing, considered to be proof of the existence of a cartel, on the one hand, and the economic foundations of communication on the other hand. Next, we focus on industries that may only host a partial cartel and reconcile the legal and economic views to some extent. Finally, we explain by intuitive analysis of an economic model that the European Commission’s legal standard recently moved even further away from current economic understanding in its Bananas decision

Measuring Scale Economies in a Heterogeneous Industry: The Case of European Settlement Institutions

We examine whether the European settlement institutions are technically efficient. This is done by means of estimating a translog cost function, and investigating whether scale economies are fully exploited. Since the sample is quite heterogeneous, fixed effects regression is introduced. From the results obtained, there clearly are economies of scale in this industry throughout all output ranges. This implies that further consolidation in this industry probably is ahead. Keywords: Technical Efficiency in Settlement and Safekeeping; Estimating Cost Functions on Panel Data; Sample Heterogeneity and Fixed Effects JEL-codes: C8 D2 G2 L8 ISBN: 978-3-902109-33-

Cost efficiency in the European securities settlement and depository industry

We examine whether the European settlement and custody institutions operate in an efficient way. To do this, we start from an analytically founded discussion regarding the activities performed by the operators in this sector. Based on the insights obtained, we estimate both a translog cost function and a constant elasticity of substitution - quadratic cost function. From the results obtained, there clearly are economies of scale in this industry. Moreover, also economies of scope between the activities performed are present. These findings imply that probably further consolidation is ahead, and that separating certain activities from others can only be done at a cost in terms of efficiency