Last update: 10/12/2018

Course Highlights

Course Highlights 

The course will be taught over 4 days, covering 32 academic hours.
- Market Definition and Assessment of Market Power.
- The Economics of Dominant Firm Abuses - Predation, Margin Squeeze / Refusal to Deal, Tying.
- The Economics of Dominant Firm Abuses II - Exclusive Contracts and Loyalty Rebates
- Economics of Merger Assessment.
- Lectures on Collusive Practices.
- Quantitative Methods for Competition Policy. 
- Collusion and Mergers In Input Markets.
- Collusion in Auctions.

Courses Contents/Description

Market Definition and Assessment of Market Power
Yannis Katsoulacos
1. Introduction: market power in antitrust and merger analysis
2. Market power as a screen vs. assessment of contributions to market power
3. Assessment of extant power: the three approaches
4. The indirect approach: the Market Definition, Market Share, Market Power paradigm
5. The hypothetical monopolist and SSNIP tests
6. Identifying the forces of demand and supply substitution
7. Demand substitutability - introduction to Critical Loss Analysis
8. Alternative formulations of the CL test
9. Taking into account of complexities in real world profits
10. The hypothetical cartel test and other implementation issues
11. The cellophane fallacy
12. Special cases: after markets and two-sided markets
13. Geographic market definition
14. Inferring market power in the indirect approach
15. Criticisms / weaknesses of the indirect approach
16. The direct approach to measuring extant market power.
17. Time to abandon the market definition-market share-market power paradigm?

The Economics of Dominant Firm Abuses - Predation, Margin Squeeze / Refusal to Deal, Tying
Yannis Katsoulacos
A. Introduction: The basic legal and economic concepts of dominance
B. Single Firm Dominance: Assessment
C. Collective Dominance
D. 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
E. Brief Discussion of Abusive Discrimination and Excessive Prices
F. Economic Analysis of Exclusionary Practices
     1. Strategic Pricing
         • Predation
         • Margin Squeeze
     2. Non-Price Practices
         • Refusal to Deal
         • Tying and Bundling
G. Case analysis will accompany the presentation of each topic

The Economics of Dominant Firm Abuses II - Exclusive Contracts and Loyalty Rebates
Juan Pablo Montero
Exclusive dealing arrangements and loyalty discounts, whether involving a single product or multiple products, are common business practices. There are efficiency enhancing reasons for engaging in these practices (e.g., protecting specific investment, alleviating double marginalization, handling moral hazard), but also anticompetitive ones. The course will cover the difference between these practices and the necessary market and contractual conditions for them to be deemed anticompetitive from an economic perspective. We will contrast this with current antitrust practice. Much of the discussion during the course will be illustrated by going over different antitrust cases

Economics of Merger Assessment
Thomas W. Ross

The review of mergers is probably the most economics-intensive aspect of competition law enforcement, in part because of the need to make predictions about potential future effects, rather than simply observing current harms to competition. This session will review the economics of key elements of merger review:
- Introduction: the steps of a merger review and the role of economists
- Types of mergers: horizontal, vertical, conglomerate
- Barriers to entry
- Motives: Economic incentives to merge
- Theories of harm: unilateral and coordinated effects, role of mavericks
- Lessening vs prevention of competition
- Efficiencies -- what counts, where should they enter merger review
- Welfare trade-offs
- Predicting the effects of mergers – UPP, reduced forms, simulations etc.
- Other topics – as time permits
     o Remedies
     o Failing firms
     o Countervailing market power
     o Vertical and conglomerate mergers
     o X-inefficiency

Lectures on Collusive Practices
Joseph Harrington
The Collusive Practices module will begin by reviewing the basic economic framework for understanding how firms are able to effectively collude. Elements of this framework are the selection of a collusive outcome, monitoring of cartel members’ conduct to ensure compliance, and imposing  a punishment when there is evidence of noncompliance. This framework is then used to investigate how various market conditions affect the stability and likelihood of collusion including the number of firms, firm asymmetries, product differentiation, and price transparency. Crucial to successful collusion is that firms able to coordinate on a stable collusive agreement. While express communication is the most common form of coordination, firms have used a wide array of methods in order to avoid detection or prosecution. These more subtle coordinating practices will be examined with a particular a focus on the use of public communication. Coverage will also include some relatively recent practices that are challenging from both an economic and legal perspective, including coordinating on list prices (but not final prices) and surcharges. The final topic will be to use some of what we’ve learned about cartels to develop screening methods that use market data to identify possible episodes of collusion.

Quantitative Methods for Competition Policy
Frank Verboven

This course provides an introduction to the most important econometric tools that are currently used in competition policy. The first part discusses demand estimation, including methods to estimate the demand for differentiated products. The second part treats applications of demand estimation tomerger analysis and market definition. The third part covers reduced form methods, with applications to merger analysis (price-concentration analysis) and cartel damages (before-after methods).

Collusion and Mergers In Input Markets
Leonardo Basso

Most of the antitrust legislation and provisions are designed for final markets, where consumers buy products from firms. Input markets, however, have the distinct feature that the demand they face is derived; it is the result of the interaction of firms and consumers in downstream markets. The derived nature of demand posits challenges to traditional antitrust actions and, in this module we will study two topics: first, how to calculate damages from price-fixing conspiracies in input markets. It will be shown that traditional measures of damages may capture less than half the total harm done by price-fixing when there is imperfect competition downstream, and that reducing the damages awarded to direct purchasers, based on the fact that part of the harm was passed-through via higher prices to indirect purchasers – as it has been claimed– may not be justified. Second, we will analyze mergers in input markets showing that the simple dead-weight loss (DWL) triangle that we might use to measure the harm to competition can grossly underestimate the true DWL done in the vertical channel.

Collusion in Auctions
Nicolás Figueroa

The focus of this module will be on collusion mechanisms that can be used by firms when competing in an auction. Linked to this, what tools are available to the regulator to prevent, detect and prosecute collusive behavior. In the analysis we will cover some standard mechanisms like bidding rings, rotation schemes and geographical agreements.
Related to prevention, we will discuss how different auction formats, which are equivalent if bidders behave competitively (like a second price and an ascending bid auction), can be more or less susceptible to collusion. This can be due, for example, to the easiness of communication between participants. We will also analyze the effects on length of contracts and initial starting time in procurement auctions, the effects of disclosing bidders information and other important design issues.
Related to detection and prosecution, we will discuss some classical methods to infer collusive behavior. The first one is to use the behavior of non-collusive firms in order to show anomalies in the behavior of collusive firms. A second one is to use cost-related measures (specific to each particular market) in order to detect bidding behavior which is inconsistent with any competitive model. After adjusting for cost shocks, competitive behavior implies statistical independence of bids across forms. Moreover, if the observed shock costs are permuted among firms, their bidding behavior should be permuted accordingly. We will show how these two conditions have been used in practice to detect and prosecute collusive behavior.
Finally, we will analyze the impact of antitrust policies, such as leniency programs, on the likelihood of  a cartel sustaining long-term collusive bidding behavior.