Competition and Regulation

Transcription

1 Competition and Regulation Summer School and Conference CRESSE GREECE Organised by Modules Outline of Course Contents Teaching Schedule

2 Module 1: Industry Economics and Game Theory for the Analysis of Market Power (mainly targeted to non-economists) (16 a.h. 1 ) Prof. Nikolaos VETTAS 1. Introduction to Markets: prices, profits, and welfare a. Values for buyers, demand functions, elasticity. b. Costs: fixed, variable, marginal; sunk, opportunity costs. c. Consumers and producers surplus. Welfare. d. Revenues and Profit. Optimal (monopoly) pricing. e. Effect of cost variations on optimal prices. f. Vertical relations: pricing at the wholesale level. 2. Perfect competition and efficiency a. Market equilibrium b. Efficiency of competitive markets as a welfare benchmark c. Types of market failures: externalities and public goods d. Dynamics 3. Use of statistics and econometrics for market analysis a. Econometric demand estimation from market data b. Forecasting future demand and elasticity c. Use of an estimated demand curve for pricing and entry decisions 4. Market definition a. Demand substitution b. Supply substitution c. Potential competition d. Measurement and relation to elasticities 5. Introduction to strategic behavior: Game Theory a. Evaluating the actions and reactions or large players b. Normal and extensive form games c. Equilibrium d. Strategic commitment e. Auctions

3 6. Oligopoly applications a. Static, repeated, and dynamic oligopoly games b. Prices and quantities: Cournot, Betrand and Stackelberg-type models c. Entry and price discrimination: application to patent expiration in pharmaceutical markets and parel trade d. Herfindal-Hirschman Index and market concentration e. Industry profitability and the Lerner index 7. Special topics in pricing a. Nonlinear pricing and price discrimination b. Introduction to bundling and tying c. Network effects, switching costs and search costs d. Uncertainty and Incomplete information e. Penetration pricing, signaling f. Investments, capacity expansion and yield management 8. Pricing and state intervention: introduction to competition policy and regulation a. Collusive effects: collusion, coordinated behavior and cartels. b. Unilateral effects: predatory pricing and abuse of dominance. c. European vs. US Law. d. Natural monopolies, regulatory policy and cost-oriented pricing. Main references Economics D. M. Kreps, Microeconomics for Managers, Norton, 2004 M. R. Baye, Managerial Economics & Business Strategy, McGraw Hill, 2009 P. Belleflamme and M. Peitz, Industrial Organization: Markets and Strategies, Cambridge, 2010 Game Theory (not technical) A. Dixit and B. Nalebuff, Thinking Strategicy, Norton, 1991 P. McAfee, Competitive Solutions, Princeton, 2002 A. Dixit and B. Nalebuff, The Art of Strategy, Norton, 2008 Game Theory (a little more technical) J. Watson, Strategy: An Introduction to Game Theory, Norton, 2002 R. Gibbons, Game Theory for Applied Economists, Princeton, 1992 Auctions P. Klemperer, Auctions: Theory and Practice, Princeton, 2004 P. Milgrom, Putting Auction Theory to Work, Cambridge, 2004

4 V. Krishna, Auctions Theory, Academic Press, 2002 Intro to Competition and Regulation Policy W.K. Viscusi, J. M. Vernon and J. E. Harrington Jr., Economics of Regulation and Antitrust, MIT Press, 2005 Motta, M., Competition Policy: Theory and Practice, Cambridge, 2004 Module 2: Dominance and its Abuse (the economics of art. 102) (16 a.h. 1 ) Prof. Yannis KATSOULACOS A. Introduction: the article 102EC. The basic legal and economic concepts of dominance B. Problems of Market Definition in Dominance Cases the Cellophane Facy. Can the problems be overcome? How? C. Single Firm Dominance: Assessment 1. The central role of market shares. 2. Factors in evaluating the significance of a specific market share measurement 3. Barriers to entry and expansion 4. Buyers Power D. Collective Dominance E. The Notion of Abusive Conduct and its Assessment 1. Defining unilateral exclusionary conduct: some problems 2. The choice of substantive and legal standards 3. Recent approaches in defining unilateral exclusionary conduct 4. Typology of Competitive Harm due to Foreclosure 5. Categories of abuse under art. 102 EC Exploitative abuses Exclusionary abuses Discriminatory abuses F. Discussion of Abusive Discrimination and Excessive Prices G. Economic Analysis of Exclusionary Practices 1. Strategic Pricing

5 Predation Price Discrimination Margin Squeeze Conditional Rebates 2. Non-Price Practices Refusal to Deal Tying and Bundling Exclusive Dealing H. Detailed case analysis will accompany the presentation of each topic Main references RO Donoghue and AJ Padilla (2006) «The Law and Economics of Article 82EC», Hart Publishing Oxford and Portland. Motta M. (2004) «Competition Policy: Theory and Practice», Cambridge University Press, Chapter 7. M D Whinston (2006) «Lectures on Antitrust Economics», MIT Press, Chapter 4. B J Rodger & A MacCulloch (2009) «Competition Law and Policy in the EC and UK», Routledge Cavendish (4th Edition). For a review of basic microeconomics (especiy by non-economists): Kreps D. (2004) Microeconomics for Managers, W. W. Norton & Co. Module 3: Collusive Practices (the economics of art. 101) (12 a.h. 1 ) Prof. Kai-Uwe KÜHN Outline of Course Contents The functioning of a cartel 1. Central issues to be covered Monitoring a collusive agreement Enforcing a collusive agreement Coordinating on a collusive outcome Avoiding detection Distinguishing traits of collusion

6 2. Organization of lectures Basic theory of collusion Market conditions conducive to collusion Collusion with imperfect monitoring Chenges with firm asymmetries Information sharing and collusion Properties of cartel price paths Cartel formation and collapse The design and impact of competition policy 1. Central issues to be covered Detecting cartels Prosecuting cartels Penalizing cartels Legal issues 2. Organization of lectures Empirical methods for detecting cartels Deterrence and penalties (government fines and customer damages) Leniency and whistleblower programs Explicit and tacit collusion: Economic and legal issues Main references Harrington, Joseph E. Jr., "How Do Cartels Operate?," Foundations and Trends in Microeconomics, Volume 2, Issue 1, July Harrington, Joseph E. Jr., "Detecting Cartels," in Handbook of Antitrust Economics, P. Buccirossi, ed., The MIT Press, Kaplow, Louis and Carl Shapiro, "Antitrust," in Handbook of Law and Economics, Volume 2, A. M. Polinsky and S. Shavell, eds., Amsterdam: Elsevier, Levenstein, Margaret C. and Valerie Y. Suslow, "What Determines Cartel Success?," Journal of Economic Literature, 44 (2006), Motta, Massimo, Competition Policy: Theory and Practice, Cambridge: Cambridge University Press, 2004 (Chapter 4). Whinston, Michael D., Lectures on Antitrust Economics, Cambridge, Mass.: The MIT Press, 2006 (Chapter 2)

7 Module 4: Economics of Mergers (12 a.h. 1 ) Prof. Volker NOCKE Outline of Course Contents The aim of this module is to introduce the theoretical ideas that underpin the economic analysis of merger appraisal and to explain how they can be applied in practice. Examples are drawn from actual cases and academic research. Students will have plenty of opportunity to discuss and chenge material in each of the topics. I. Introduction 1. Private effects of mergers 2. Welfare and merger control (including substantive tests and welfare standards) II. Horizontal mergers 1. Unilateral effects homogeneous products 2. Unilateral effects differentiated products 3. Coordinated effects (tacit collusion) 4. Buyer power 5. Appraisal of competitive effects structural indicators (including market shares and concentration) 6. Appraisal of competitive effects upward pricing pressure (UPP) III. Non-horizontal mergers 1. Vertical effects 2. Conglomerate effects (portfolio effects) IV. Policy implementation 1. Merger remedies 2. Policyevaluation Sample Reading Lyons, B. (2009) Cases in European Competition Policy: the Economic Analysis, Cambridge University Press Motta, M. (2004) Competition Policy: Theory and Practice, Cambridge University Press Whinston, M. (2007) Antitrust policy towards horizontal mergers in M. Armstrong and R. Porter (eds) Handbook of Industrial Organization, Vol.3 ch.36, North Holland

8 Module 5: Quantitative Analysis for Competition Policy (targeted to working economists and postgraduate students specialising in Competition and Regulation) (12 a.h. 1 ) Prof. Frank VERBOVEN A. General framework for measuring market power 1. Homogeneous products a. Traditional SCP paradigm b.measuring market power when conduct is known c. Identification of conduct d. Detecting cartels e. Applications 2. Differentiated products a. Representative consumer models, including multi-stage budgeting and distance-metric approach b. Discrete choice models, including logit, nested logit and random coefficients logit c. Applications B. Applications and cases 1. Relevant market definition a. The SSNIP-test b. Traditional approaches (price correlations, etc.) c. Critical loss and break-even analysis d. SSNIP-test with differentiated products e. Applications 2. Merger analysis a. Diversion ratio s and Upward Pricing Pressure Test b. Simulation analysis c. Price-concentration studies d. Ex post merger evaluation e. Applications 3. Cartels & damages, and other agreements a. Measuring price overcharge b. Implementing the passing-on defence

9 c. Vertical agreements d. Applications Main References S. Bishop and M. Walker, The Economics of Competition Law: Concepts, Applications and Measurement, Sweet & Maxwell. E. Garces and P. Davis (2009) Quantitative Techniques for Competition and Antitrust Analysis, Princeton University Press. For a review of basic econometrics: J. Stock and M. Watson, Introduction to Econometrics, Pearson Addison Wesley. Module 6: Economics of Sectoral (Network Industry) Regulation (16 a.h. 1 ) Prof. Claude CRAMPES &Prof. Tommaso VALLETTI Lecture 1: Why regulate? by Prof. Tommaso VALLETTI (Main topics: market failures, social objectives, competition policy vs. regulation, instruments vs. objectives, structural vs. behavioural regulation, integration vs. separation, margin squeezes, non-price discrimination) Lecture 2: Regulatory tools by Prof. Tommaso VALLETTI (Main topics: price regulation, price caps, ROR, incentive contracts, one-way access pricing and essential facilities) Lecture 3: Entry by Prof. Tommaso VALLETTI (Main topics: licensing, auctions, access to non-essential facilities) Lecture 4: Networks by Prof. Claude Crampes

10 (Main topics: network characteristics (lines and nodes, natural monopoly, essential infrastructure, neutrality), externalities (congestion, transit losses, club externalities), smart grids (reliability, resilience, embedded production) Lecture 5: Regulating the telecoms industry 1 by Prof. Tommaso VALLETTI (Main topics: competitive bottlenecks and two-way access pricing, the waterbed effect, international roaming) Lecture 6: Regulating the telecoms industry 2 by Prof. Tommaso VALLETTI (Main topics: the European New Regulatory Framework, effects of regulation, the ladder of investment, NGNs, spectrum management) Lecture 7: Regulating the energy industry 1 by Prof. Claude Crampes (Main topics: infrastructure management and development (transport and distribution, unbundling, concession, interconnection, regulation layers, public service obligation), competition (wholesale market(s), energy supply) Lecture 8: Regulating the energy industry 2 by Prof. Claude Crampes (Main topics: environmental policies (emissions trading scheme, renewables, energy saving), demand responsiveness (load shedding, energy poverty) Main References Chao H.P. (2011) Demand response in wholesale electricity markets: the choice of customer baseline, J. Regul Econ, 39:68 88 European Commission (1999), Liberalisation of network industries. Economic implications and main policy issues, European Economy, n 4 ec.europa.eu/economy_finance/publications/publication8093_en.pdf Shy O. (2001) "The Economics of Network Industries", Cambridge University Press. Readmainlychapters: 1, 2, 3, 4, 5, 6

11 Module 7: Competition Policy and Intellectual Property Rights (IPRs) (12 a.h. 1 ) Prof. Pierre REGIBEAU & Dr Katharine ROCKETT 1. Economic Characteristics of IPRs 2. IPRs and Innovation 3. IPRs and Market Power 4. IPR Licensing Horizontal vs. Vertical 5. Breadth of IPR and effects on innovation and competition 6. Enforcement issues 7. CaseStudies Module 8: Recent Developments in EU Competition Law (8 a.h.1) Dr. Assimakis KOMNINOS 1. Enforcement Priorities & Policy Developments 2. Article 101 TFEU Developments a. Cartels (infringement decisions /settlements / appeals: mainly parental liability and standard of proof) b. Horizontal and Vertical Agreements 3. Article 102 TFEU Developments a. Pending investigations b. Commitment decisions c. Pricing abuses 4. Procedural Developments a. Payment of Fines b. Rights of Defence

12 c. Due Process d. Cartel Parel Investigations 5. Access to Documents & Private Damages Actions 6. EU Courts New Developments 7. ProspectsfortheYearAhead Module 9: Competition and Regulation in Two-Sided Markets (4 a.h. 1 ) Prof. Martin PEITZ 1. The Framework of Two-Sided Platform Markets 1.1 Main concepts and issues 1.2 Basic model of platform competition 1.3 Further developments 2. Competition Policy in Two-Sided Platform Markets 2.1 Market definition and market power 2.2 Exercise of unilateral market power 2.3 Mergers 2.4 Coordinated practices 3. Regulatory Issues in Specific Multi-Sided Industries 3.1 Media Markets (advertising regulation) 3.2 Telecommunications Markets (access regulation; the net neutrality debate) 3.3 Payment Systems (regulation of the interchange fee) Main References Belleflamme, P. and Peitz, M. (2010). Industrial Organization. Markets and Strategies. Cambridge: Cambridge University Press. Chapter 22. Evans, D.S. (ed.) (2011). Platform Economics: Essays on Multi-Sided Businesses. Competition Policy International.

13 2015 CRESSE Summer School Teaching Schedule (tentative) Sessions coffee breaks Morning 09:00 12:35 10:45 11:00 Afternoon 14:00 17:35 15:45 16:00 Free program 12:35 14:00 School Modules Module 1 16 Module 2 16 Module 3 12 Hours 1st Week (June 27 th - July 3rd) 2nd Week (July 4 th - July 10 th ) Sat Sun M T W Th F Sat Sun M T W Th F morn. Module 4 12 aftern. Module 5 12 aftern.* Module 6 16 Module 7 12 morn. Module 8 8 aftern.* morn. Module :00 13:00 WelcomeCeremony 18:15 19:30 Conference 08:30 19:10 08:30 19:35 08:30 17:40 ConferenceDinner 21:00 *16:00-19:35 morn.: Morning, aftern.: Afternoon Total academic hours (4+4) per : 8 hours