What’s the aim for competition policy: optimizing market structure or encouraging innovative behaviors?

Innovation is usually thought of as a change in the fundamentals of an economy, which can require adjustments by policy-makers. The latter are usually thought as in regard to a dominant vision, which is to restore an optimal market structure, and leads to a competition policy mainly aimed at controlling for antitrust practices and limiting market power. In this paper, we favor another vision of innovation, as a discovery process that cannot allow ex ante a definition of best practices. Dealing with information issues in two different and alternative perspectives, we argue that antitrust authorities confront a market imperfection–market failure dilemma (MI–MF dilemma) which leads them to favor the existence of appreciative and discretionary policy rather than encouraging the existence of any market structure thought of as optimal as regards the current state of information. We conclude with policy implications, contrasting the EU with the US. This paper was presented at the 10th International J.A. Schumpeter Society Conference on Innovation, Industrial Dynamics and Structural Transformation: Schumpeterian Legacies, Milan 2004. It owes very much to the collaboration of J-L Gaffard with M. Amendola in the recent years. However he is not responsible for the way we have taken advantage of it.     

Merger policy in innovative industries

We analyze optimal merger policy in R&D-intensive industries with product innovation aiming to improve the quality of products. Our results suggest that a permissive merger policy is rarely optimal in high-tech industries when the antitrust authority considers a welfare standard that balances the impact of mergers on consumers’ surplus and firms’ profits. In particular, relative to a benchmark where the effects from R&D are absent, we show that the optimal merger policy should not be substantially more permissive in the presence of those effects from R&D.     

算法合谋的反垄断规制及工具创新研究

在数字经济领域,数字商务企业采用算法定价会明显提高合谋的可能性和可实施性,具有较大的价格合谋风险,因而成为反垄断法关注的重点。学理上,尚待明确的问题有:算法定价促进合谋的内在机理和类型化机制;如何创新反垄断执法体制以有效规制自主学习算法;在反垄断事后执法无效情况下,是否需要以及如何实行事前规制等。研究表明:算法合谋的反垄断规制宜坚持分类治理原则,采取事后反垄断禁止为主并辅之以事前规制的政策组合,反垄断政策工具创新应主要针对自主学习算法合谋。算法合谋反垄断规制政策需重新界定构成非法合谋的"协议"要件,明确当事企业的主体责任,重在采取以"软执法"为主的反垄断执法体制。事前规制政策应坚持"基于设计来遵守法律"的原则,强化算法审查机制和审查能力建设,并将提升算法透明度和可问责性作为重点。     

A tale of two traditions: Pierre Force's Self-interest before Adam Smith

Abstract

The paper compares different strands of New Keynesian Economics with regard to Keynes' original work. Two issues are analysed in detail. First, the explanations provided by Keynes and New Keynesians of nominal and real wage behaviour. Second, the different theories concerning the ability of flexible nominal wages in assuring full employment. It is argued that, although involuntary unemployment is a central problem both in Keynes' and New Keynesians' views, referring to the role of nominal and real wages in explaining unemployment, New Keynesians theories present important features that differ, sometimes substantially, from the concepts developed by Keynes in his General Theory.     

Cooperation In R&D With Spillovers And Delegation Of Sales ∗

Cooperation in several phases of the innovation process is viewed by antitrust authorities with suspicion. They face the dilemma between providing the right incentives for the appro-priability of returns to R&D and the risks of diminishing product market competition. The current legislation in the European Union and the United States gives special treatment to cooperation in R&D and the joint exploitation of results (extended cooperation).

We study several collusive regimes for a class of examples in which vertical relations are explicitly introduced. Regarding antitrust policy implications we fmd that: a) there is an ana-lytical justification to a ‘rule of reason’ treatment for extended cooperation in research joint ventures and, b) individual exemptions, though restrictive of competition, might be welfare improving.     

Damage Estimation and Its Accuracy Antitrust Policy Implication *

This paper empirically estimates antitrust damage based on the rich information on cost factors in the bid-rigged Texas school milk market. Empirical results demonstrate that damage estimate by antitrust agency is a significantly underestimated amount of the true damage. This understatement of true harm inevitably includes implementation biases in the antitrust system. [K21, L13, L40]     

Trade Policy and Antitrust: Do Consumers Matter to Legislators?

We provide one of the first efforts to measure the importance of consumer preferences in legislators' trade policy decisions by estimating the degree to which the level of antitrust enforcement in the legislator's state impacts his or her vote on free trade agreements. To the extent that antitrust and trade liberalization are both viewed as pro‐consumer in nature, we would expect to see a positive relationship between antitrust enforcement in their legislative district and Congressional votes in support of trade liberalization. We find evidence suggesting that consumer preferences do play a role in legislative decisions on trade policy.     

INTERSTATE BANKING AND ANTITRUST LAWS: HISTORY OF PUBLIC POLICIES TO PROMOTE BANKING COMPETITION

Over the past several years, antitrust laws' significance as a public policy to promote competition in banking has diminished. Deregulation has intensified competition so much that it has made antitrust laws nonbinding constraints, even during a merger movement of extraordinary proportions. Deregulation and attenuating antitrust raise a question as to whether a distinctive competitive policy for commercial banks should exist as it has in the past.
Two earlier policies are identified and reviewed in this paper: (1) free banking, which in several forms existed from the 1830s to the early 1930s, and (2) antitrust, which became relevant during the early 1960s. Experience under both policies illuminates the interaction between competition and regulation in banking. Such experience indicates that the effects of current competitive policy must be evaluated within the developing regulatory environment. Partially evaluating current policy within this context suggests that new charter requirements should be reformulated and that large bank mergers should be limited. So long as a distinctive regulatory system exists, a distinctive competitive policy for banks is needed.     

INDUSTRY TRADE BALANCE AND DOMESTIC MERGER POLICY: EMPIRICAL EVIDENCE FROM U.S. MERGER POLICY FOR MANUFACTURING SECTORS

The literature on antitrust in an open-economy setting is inconclusive with respect to the role played by trade balance on the tenor of domestic merger policy. Using a panel dataset composed of U.S. merger reviews by industrial sector over the 1982–2001 period, I empirically test the impact of sectoral trade balance on the level of antitrust scrutiny. The results suggest that larger trade balances lead to more vigorous antitrust scrutiny; thus "strategic" merger policy does not appear evident, and consumer surplus appears to guide U.S. merger policy even under the lure of international competitive gains.     

Cooperation versus competition in product innovation

This paper analyzes the optimal antitrust policy in the context of a patent race. In a simplified model, we identify the conditions under which allowing cooperation yields greater welfare than imposing competition. In view of our results, we discuss, critically, the current European policy towards R&D cooperation.     

WHAT PRICE THEORY CAN—AND CANNOT—DO FOR ANTITRUST

This paper examines the methodology and policy recommendations of Judge Robert Bork's writing on antitrust. It accepts as valid his premise that conventional price theory is the only appropriate organon for evaluating the welfare impact of an antitrust rule. However, it holds that in the analysis of cartels and mergers, Bork does not realize the full implications of his approach.
Of the many prohibitions which antitrust law now contains, Bork wants to retain only two-the prohibition of cartels and of large horizontal mergers. Even these two, however, cannot be maintained on pure price theory grounds. According to price theory, if price or merger agreements are inefficient, and i f entry and exit are free, then these agreements-like other inefficient practices-will be eroded by entry. Consistently applied, then, price the0 y provides no support for antitrust laws.
A lack of support on price theory grounds does not imply that antitrust laws are unjustified. Most practices prohibited by anti-trust law have closesubstitutes. Consequently, the law probably inflicts no great harm on economic efjiciency. Moreover, repeal of these laws could result in state-owned monopolies or economic planning, both of which would be far worse for economic efficiency.     

UMBRELLA DAMAGES: TOWARD A COHERENT ANTITRUST POLICY

Price‐fixing cartels usually do not involve all members of an industry. To the extent that the nonconspiring industry members set their prices under the price umbrella of the cartel, the customers of the nonconspiring firms suffer overcharges just like customers of the conspiring firms. Whether these so‐called umbrella plaintiffs have standing to sue for antitrust damages is an unresolved policy question, because the Supreme Court has not spoken on “umbrella damages.” In this article, we identify the judicial concerns regarding umbrella damage claims, which can be traced to Mid‐West Paper and Petroleum Products Antitrust Litigation. These decisions raise concerns that the fact of injury is conjectural and the measurement of the damages is speculative. We first review the divided judicial treatment of standing for umbrella plaintiffs. Next, we describe the economics of umbrella pricing, which reveals that umbrella claims are not inherently conjectural. We then examine the econometric analysis necessary to estimate damages, demonstrating that umbrella damage estimates are not inherently speculative. We also examine some difficulties that exist in damage estimation generally and for umbrella plaintiffs in particular. Finally, we argue that granting standing to umbrella plaintiffs is consistent with the goals of antitrust policy. (JEL L1, L4, K2)     

INTERNATIONAL ANTITRUST ENFORCEMENT AND MULTIMARKET CONTACT*

This article analyzes cartel formation and international antitrust enforcement when multinational firms operate in several jurisdictions with local antitrust authorities. We are concerned with how the sustainability of collusion in one local market is affected by the existence of collusion in other markets when they are linked by a negative demand relationship. The interdependence of cartel stability across markets leads to potential externalities in antitrust enforcement across jurisdictions. Local antitrust enforcement equilibrium enforcement may exhibit a nonmonotonicity in the degree of market integration. We compare it with globally optimal antitrust enforcement policy and discuss the role of international antitrust coordination.     

The Return of Geopolitics in the Era of Soft Power: Rereading Rudolf Kjellén on Geopolitical Imaginary and Competitive Identity

This paper looks at how Swedish political scientist Rudolf Kjellén (1864–1922) conceived of the relationship between nature and culture, between material and immaterial power as well as the role of soft power, geopolitical imaginary and competitive identity in off-setting potentially unfavourable geopolitical conditions for small and medium-sized states. It is argued that with regard to small states, Kjellén did not maintain a consistent separation between “soft” cultural resources of power and “hard” laws of nature. Rather, he placed the mutually constitutive tension between geography (nature) and politics (culture) at the centre of his politico-scientific analysis, arguing that active “biopolitics” could supplement geopolitics. In Kjellén’s conception, cultural and natural resources are instruments of an otherwise integrated notion of power which challenges the contemporary separation between hard and soft power.     

COLLUSION AND ANTITRUST DETECTION*

This paper investigates the impact of antitrust policy on the strategic choice of product specification when firms can collude with respect to prices, cannot collude with respect to location and may have their collusion ended if it is detected by the antitrust authority. Depending on the aggressiveness of the antitrust authority, different location configurations may emerge in equilibrium. Extremely aggressive and extremely lax policies lead to the least efficient outcomes while the configuration maximizing social welfare is obtained by an intermediate policy.     

Technical Change,Effective Demand and Employment

Ricardo and Marx saw technological change as a possible cause of long-period unemployment. Neoclassical and Schumpeterian economists regard technological unem ployment as a transitory phenomenon. This paper argues that the capital critique (i) demolishes the neoclassical claim that market mechanisms will restore full employment whenever workers are displaced by technical change, and (ii) rehabilitates the old Ricardian argument that automatic compensation factors are generally absent. The neo-Schumpeterian notion of autonomous investment is also rejected, in favour of the view that, in the long period, all investment is induced. By extending Keynes's theory of effective demand to the long period through a model based on the supermultiplier, this paper suggests that the ultimate engines of growth are located in the autonomous components of effective demand--exports, government spending and autonomous con sumption. Technical change plays a role in the accumulation process through its effects on consumption patterns and the material input requirements. However, the impact of technical change is now seen to depend upon circumstances such as income distribution, the availability of bank liquidity and exchange rate policy.     

Choosing sides in the trilemma: international financial cycles and structural change in developing economies

ABSTRACT

This paper analyzes the impact of international financial cycles on structural change in developing economies. It is argued that the impact of these cycles depends on the specific combination of macroeconomic and industrial policies adopted by the developing economy. The cases of Brazil and Argentina are contrasted with those of Korea and China. In the Asian economies, macroeconomic policy has been a complementary tool along with industrial policy to foster the diversification of production and capabilities. Inversely, in the case of the Latin American countries, long periods of real exchange rate (RER) appreciation, combined with the weaknesses (or absence) of industrial policies, contributed to the loss of capabilities and lagging behind.     

Climate Policy under Technology Spillovers

We study climate policy when there are technology spillovers between countries, as there is no instrument that (directly) corrects for these externalities. Without an international climate agreement, the (non-cooperative) equilibrium depends on whether countries use tradable quotas or carbon taxes as their environmental policy instruments. All countries are better-off in the tax case than in the quota case. Two types of international climate agreements are then studied: One is a Kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas. In the second type of agreement, a common carbon tax is used domestically in all countries. None of the cases satisfy the conditions for the social optimum. Even if the quota price is equal to the Pigovian level, R&D investments will be lower than what is socially optimal in the quota case. It is also argued that the quota agreement gives higher R&D expenditures and more abatement than the tax agreement.     

Subjectivism,joint consumption and the state: Public goods in Staatswirtschaftslehre *

Abstract

On the basis of F.B.W. Hermann's Staatswirthschaftliche Untersuchungen and of major German, Austrian and Swedish contributions to public economics, two specific claims with regard to the Germanic influence in the development of public expenditure theory are put forward in this paper. It is contended that the German achievements concerning the conceptual clarification of public goods are: (i) important as conceptual ingredients of the modern ‘micro-based’ theory of the public sector: (ii) less closely linked to some historical and intellectual German Sonderweg (culminating in historism, a collectivistic view of social entities and a mystical glorification of the State) than is often suggested.

It is argued that these achievements rather were to a large extent inspired by the more cosmopolitan tendencies in German thought. An important influence is Kantian liberalism. Kant construed a kind of foundational interdependence between the public and the private sector. This prepares the ground for a framework of complementary institutions instead of explaining public institutions in terms of a market failure-perspective based on non-excludability: the view developed in German Idealism gives non-rivalry the pivotal role: the explanation of public institutions systematically hinges upon the existence of goods, the benefits of which are necessarily universal and hence are necessarily made available in a non-rival mode.     

The death knells of mature technologies

The oscillatory behavior in the mature phase of some technologies' diffusion-related S curves are investigated, specifically with regard to the influences that other technologies can have on the oscillations. The notion of mortality indicators is raised, that is, whether such behavior is a signal that the mature technology is under attack from an emerging technology. The case of structural panels in the wood products industry is considered as an example, and an updated forecast of the substitution of oriented strand board for plywood is made. It is concluded that factors such as macroeconomic business cycles are primarily responsible for the oscillations in plywood's S-curve, although it is argued that an emerging technology can also contribute to perturbations in a mature technology's S-curve. Two possible alternative explanations for the oscillatory behavior are also discussed, a previously proposed chaos formulation, and a mathematical model based on modified Lotka-Volterra equations. This model shows that the oscillatory behavior in mature technologies' S-curves can also result from symbiotic interaction between two technologies under certain circumstances.