Mergers with Differentiated Products: Where Do We Stand?

Review of Industrial Organization - On the occasion of the 10th anniversary of the 2010 U.S. Horizontal Merger Guidelines, this article provides an overview of the state of economic analysis of...     

The transient and persistent efficiency of Italian and German universities: a stochastic frontier analysis

Despite measures on the European level to increase the compatibility between the higher education sectors, the recent literature exposes variations in their efficiencies. To gain insights into these differences, we split the efficiency term according to the two management levels each university is confronted with. We separate short-term and long-term efficiency while controlling for unobserved institution-specific heterogeneity. We argue that the first term reflects the efficiency of the individual universities working within the country, while the second term echoes the influence of the overall country-specific higher education structure. The cross-country comparison displays whether efficiency differences between countries are related to the individual performance of their universities or their higher education structure. This allows more purposeful policy recommendations and expands the literature regarding the efficiency of universities in a fundamental way. Choosing Italy and Germany as two important illustrative examples, we show that the Italian higher education sector exhibits a higher overall efficiency value. With the individual universities working at the upper bound of efficiency in both countries, the remaining inefficiency and the gap between the countries are caused by persistent, structural inefficiency. Future measures should hence aim at the country-specific structure and not solely at the activities of single universities.     

Measuring the efficiency of European education systems by combining Data Envelopment Analysis and Multiple-Criteria Evaluation

Education is considered an important factor of economic growth, employment and social inclusion. However, the economic crisis has put the need to achieve educational goals in the most efficient way ever more to the fore. The main objective of this paper is to assess the spending efficiency of European compulsory educational systems, creating a ranking of countries based on the efficiency scores of their systems using a number of standard variables from the literature. To this end, we also present a methodological innovation that combines Data Envelopment Analysis (DEA) with discrete Multiple Criteria Evaluation (MCE), two methods that we consider complementary if used for providing a performance analysis. Moreover, both methods identify a set of common variables which are associated with higher levels of efficiency in educational systems (e.g. some characteristics of teachers, the stock of adults’ human capital and lower expenditures per student). The results show that findings using DEA are largely confirmed by MCE.

     

Municipal Solid Waste,Market Competition and the EU Policy

Two of the main pillars of the EU solid waste policy are the Proximity Principle and the Self-Sufficiency Principle. According to those, waste should be disposed as close as possible to where it has been produced. A likely effect of such provision is to prevent competition from neighbouring areas and increase the market power of local disposers, with possible undesirable consequences for other firms in the vertical chain. We show through a simple spatial model that one additional effect of the Proximity Principle and of the Self-Sufficiency Principle is to provide an incentive to collectors and waste producers to increase the amount of separated waste.     

Recent Developments at DG Competition: 2016/2017

The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This year’s article provides first a general presentation of the role of the Chief Competition Economist’s team and surveys the main achievements of the Directorate General for Competition over 2016/2017. The article then reviews the economic work undertaken in one merger case between Dow/DuPont, which raised specific issues related to innovation, as well as in an antitrust case on parity clauses related to Amazon e-books.     

Regional labour markets and job accessibility in City Network systems in Germany

Spatial labour markets are subjected to the forces of regional economic activity and competing network effects. Commuting is, therefore, an important equilibrating vehicle in a City Network constellation. Cities act as attractors of commuters, as most economic activity occurs in cities, thus providing a high share of attractive workplaces. Cities that are centrally connected in a network may act as both centripetal and centrifugal forces in the whole system. The present paper focuses on what is named the City Network (CN) approach. A central idea is the accessibility concept, which is interpreted here as the potential of opportunity for interaction, which has a positive impact on economic growth. In our paper, the accessibility concept and the CN concept are linked together by positioning accessibility in the CN system. Since accessibility measures give geographical insights into the distribution of economic activities and the related (dis)equilibrium of regional development patterns, the connection with the labour market is evident, and, therefore, a second focus of our analysis.In an applied setting, our paper aims to investigate spatial accessibility patterns in the main CN in Germany. The 17 districts which belong to the country’s CN were chosen from the 439 German labour market districts on the basis of three criteria: (a) their connection to the high speed railway network; (b) the most accessible districts according to previous results (2002); (c) relevant districts for the German economy. Our applied modelling research concerns home-to-work commuters travelling between the selected districts belonging to the German CN, for both 2003 and 2007. Here, a comparative analysis of the ranking of the most accessible districts - also for different intra-zonal travel times - is carried out in order to map out the changes in accessibility between 2003 and 2007, especially in the light of new high speed connections and commuting flow dynamics.     

Differential pricing, parallel trade, and the incentive to invest

I consider the case for imposing uniform pricing on a monopolist in a setting where markets can be segmented according to differences in marginal costs and/or consumer demand. I also analyze the ex ante impact on incentives to invest in R&D. I show how two opposite trade-offs arise. When differential pricing is demand-based, uniform pricing has good ex-post welfare properties but leads to lower investment ex ante. Conversely, when differential pricing is cost-based, uniform pricing has bad ex-post welfare properties but leads to higher investment ex ante.     

Net Neutrality with Competing Internet Platforms

We propose a two‐sided model with two competing Internet platforms, and a continuum of Content Providers (CP's). We study the effect of a net neutrality regulation on capacity investments in the market for Internet access, and on innovation in the market for content. Under the alternative discriminatory regime, platforms charge a priority fee to those CP's which are willing to deliver their content on a fast lane. We find that under discrimination, investments in broadband capacity and content innovation are both higher than under net neutrality. Total welfare increases, though the discriminatory regime is not always beneficial to the platforms as it can intensify competition for subscribers. As platforms have a unilateral incentive to switch to the discriminatory regime, a prisoner's dilemma can arise. We also consider the possibility of sabotage, and show that it can only emerge, with adverse welfare effects, under discrimination.     

Switching Costs in Vertically Related Markets

In the presence of switching costs, firms are ofteninterested in expanding current market shares toexploit their customer base in the future. However, ifthe product is sold by retailers, manufacturers mayface the problem of extracting too much surplus fromthe retailer. If this happens, then the latter has notan incentive to build a subscriber base. This paperwould like to connect two streams in the literature,on switching costs and vertical restraintsrespectively. An upstream–downstream duopoly model ispresented to analyse the mutual incentive for firms toenter into particular trading relationships. Whenswitching costs are high, then integrated structuresare predicted. On the other hand, when lock in effectsare not too relevant, mixed structures withindependent and integrated firms emerge as anequilibrium in growing industries. The results arediscussed with reference to the UK mobiletelecommunications industry.