Review of Industrial Organization最新文献

I examine developments in the application of performance-based regulation (PBR) to electricity distribution and transmission in the United States. Applications of comprehensive PBR to electricity distribution had been slow to diffuse in the U.S. prior to roughly 2000. PBR mechanisms are now being applied more frequently to electricity distribution, which reflects the changing structure of the electric power industry and the increasing obligations that are being placed on electric distribution companies. The new obligations are a consequence primarily of aggressive targets for decarbonizing the electricity sector in nearly half the states and the goal of using “clean” electricity to electrify transportation, buildings, and other sectors. PBR should be viewed as a set of “building blocks” that can be adopted in various combinations and should recognize that PBR and traditional cost-of-service regulation (COSR) are properly viewed as complements rather than substitutes. Recent reforms in the regulation of distribution companies in Great Britain—“RIIO”—have been influential in the U.S. The main reforms contained in RIIO are discussed. There has been essentially no application of PBR by the Federal Energy Regulatory Commission (FERC) to owners of transmission assets or to independent transmission operators. FERC has applied targeted incentives to encourage investment in transmission facilities and membership in independent system operator organizations. However, the regulation of transmission rates relies primarily on COSR in the form of formula rates and has poor incentive properties. Regulation of independent system operators is a challenge because they are non-profit organizations with no equity to put at risk. Reforms here are suggested.

This paper is on the new (2023) Merger Guidelines. It makes several arguments: First, that the Guidelines should be understood as existing in a political equilibrium. Second, that the new structural presumption of the Merger Guidelines–HHI = 1,800—is too strict, and that an economically reasonable revision in the structural presumption would have increased rather than decreased the threshold. Whereas the new Guidelines lowers the threshold to HHI 1,800 from HHI 2,500, an economically reasonable revision would have increased the threshold to HHI 3,200. I justify this argument using a bare-bones model of Cournot competition. Third, it seems unlikely, as an empirical matter, that merger enforcement under the existing Guidelines is socially desirable. Fourth, that federal merger enforcement raises serious constitutional issues–which were originally discussed in 1904—and that it may be time now, in view of the new Guidelines, to return to these foundational constitutional questions.

The final version of the 2023 Merger Guidelines, which were issued in December 2023, is a vast improvement over an earlier draft—which indicates that the Agencies took the many comments that they received on a draft very seriously. These Guidelines break some new ground that older Guidelines did not address, and make many positive contributions, which this paper spells out. They are also excessively nostalgic for a past era, however, and this may explain their propen sity to treat empirical questions as issues of law: This is one way to insulate these Guidelines from further revision. The excessive reliance on one decision, Brown Shoe, is unfortunate—particularly since that decision has been so often repudiated, even by the Supreme Court itself. This paper pays particular attention to: the Guidelines’ treatment of structural triggers and direct measures of competitive effects; their aggressive position on potential competition mergers; their willingness to weigh a “trend” toward concentration as a factor; and their treatment of serial acquisitions. The Guidelines include a welcome new section on mergers involving multi-sided networks, although their view of networks is too one-sided; and the Guidelines also contain an expanded section on mergers with harmful effects on suppliers—including labor. The Guidelines’ treatment of market definition is likely to lead to underenforcement because they define markets too broadly. Finally, the Guidelines could have made better use of recent retrospective studies—many of which would have provided further support for the substantive positions that the Guidelines take.

Declining industries are characterized by prolonged declines in demand and excess capacity. Mergers of firms in declining industries often lead to rationalization of capacity, which makes production more efficient and makes firms better off. This benefit, however, may not be merger-specific, since capacity could be rationalized via firm exit. But the exit process itself may lead to inefficiencies, such as delays and inefficient ordering of exit (i.e., low-cost capital exits before high cost capital), which could warrant a merger. Increased market power of the combined firm, however, may lead to higher prices for consumers, which would be anticompetitive. This article considers the procompetitive efficiencies and anticompetitive consequences of mergers in declining industries and will discuss how the Agencies may evaluate these mergers.

Relying heavily on legal analysis, the 2023 Merger Guidelines argue for a fundamental shift in antitrust enforcement that places more emphasis on protecting competitors and less on protecting the beneficiaries of competition. It is up to courts, not economists, to ascertain whether this interpretation of antitrust law is correct. But economists can and should analyze the likely economic effects. Evidence that antitrust enforcement has permitted some markets to be overly concentrated justifies the tightening of horizontal merger enforcement that is signaled by these guidelines. Evaluating the elimination of double marginalization from vertical mergers as a part of an efficiency defense rather than as a primary economic effect reflects a fundamental misunderstanding of the economics of vertical mergers. At a minimum, these guidelines will further damage the reputation of the DOJ and FTC among competition policy enforcers in other countries. A potentially more serious cost will be if foreign competition authorities use these guidelines to justify enforcing their own laws to protect inefficient domestic firms against foreign competition.

Leniency Programs (LPs) reward cartel-participating firms that come forward with evidence that can be used as proof of the illegal conduct in which they have participated. The marker system allows a leniency applicant to reserve its position in the reporting queue before the names of the eligible applicants are announced. We show that markers can reduce the destabilizing effect of LPs: When cartels are established either with or without a marker system, self-reporting and cartel disruption are less likely with markers, as compared to without markers. In addition, the introduction of markers in LPs may further the sustainability of collusion.

This article is designed to explicate the somewhat misunderstood analysis in the 2023 Merger Guidelines (MGs) and situate the MGs in the context of the legal as well as economic environment in which they operate. The MGs refine economic analyses in previous MGs, renew emphasis on certain competitive concerns and approaches, and add several emerging new competitive issues. They also integrate certain goals of post-Chicago and Neo-Brandeisian approaches to merger analysis. The MGs integrate the economic analysis into the traditional legal structure of the “prima facie” and “rebuttal” evidentiary stages and place greater weight on avoiding false negatives over false positives in various places, which is a principal element in both post-Chicago and Neo-Brandeisian approaches. An important theme that runs through the 2023 MGs is that competitive effects analysis should not be limited to static competitive effects analysis of the immediate unilateral or coordinated price effects of a merger. They stress that the analysis should also account for the dynamic effects that result from the change in market structure that follows from the merger as well as the changes in the incentives of the firms. As in the seminal Spence-Dixit models, the entrant would rationally anticipate that the lower marginal costs of the merged firm could produce more intense post-entry price competition and a higher likelihood that the entry would be unprofitable. Thus, higher barriers to entry or expansion may result, which means that the merged firm’s rebuttal burden of production under the sliding scale should be increased accordingly under the decision theory risk analysis that places greater weight on avoiding false negatives.

The 2023 Merger Guidelines make some notable improvements over the 2010 Horizontal Merger Guidelines. They give greater emphasis to the idea that predicting the competitive effects of a proposed merger is inherently difficult and that to block a merger the government need only show a risk that the merger may substantially lessen competition – not that it will do so. They also give greater emphasis to dynamic competition and innovation – especially with regard to acquisitions of potential entrants – and they add useful material on multi-sided platforms. However, the treatment of market definition in the 2023 Merger Guidelines may weaken horizontal merger enforcement by demoting the role of the “hypothetical monopolist test,” which is used to define markets for the purpose of measuring market shares, and by removing extensive material from prior guidelines that explained why market shares measured in narrower markets tend to be more informative than market shares measured in broader markets. The 2023 Merger Guidelines lower the market concentration thresholds that trigger a presumption by the antitrust enforcement agencies that a merger may substantially lessen competition, but the enforcement data suggest that change will have little effect in practice. The 2023 Merger Guidelines also may lead to less effective deterrence of harmful mergers because they are not well targeted at the mergers that are most likely to substantially lessen competition. One cannot prioritize everything.

We consider competing mobile marketers that complement geo-targeting with behavior-based pricing and send personalized offers to customers. Firms observe consumers’ locations and can infer their (heterogeneous) responsiveness to discounts from purchase histories. The overall profit effect of behavioral targeting is driven by firms’ discount factor and consumers’ transport cost and can be neutral, positive, or negative. We are the first to show that the profitability of behavioral data may depend on firms’ time preferences. We derive conditions for when firms prefer more rather than less behavioral targeting.

This article discusses the auctioning of financial contracts by aggregations of consumers who aim to reduce the spot price of a concentrated industry’s product; this is a frequent arrangement in electricity markets. The contracts' underlying asset is the product; the auctions' bidding variable is the strike price; and the bidders are the producers. Using a three-stage complete-information game, we show that when all consumers belong to some group, in the subgame perfect Nash equilibrium, each group fully hedges its consumption, and total output reaches its efficient level. Otherwise, each group over-hedges its consumption, and total production is below the efficiency level.