The merger Microsoft-Yahoo has been approved on both sides of the Atlantic, see the FT article. One rationale advanced for authorizing the merger is the possibility that the merged entity will be a credible competitor to Google, in particular concerning search engines. Hence the competitive authorities in the US and the EU believed that two will lead to more competition than three.
Blog on industrial organization and antitrust
2 Feb 2010 - 08:27
The launch of the iPad creates ripple effects in other industries. iPad will offer e-books and enters in concurrence with Amazon and its Kindle for distributing e-books. The initial negotiation of Apple with book publishers like Macmillan seems to have been done under the shadow of the "agency model" where the publisher retains most of the rights to set the price and gives 30% to the distributor. After an initial announcement by Apple that e-books will be offered at a price of 14.99$, significantly more than the going price of 9.99$ offered by Amazon on the Kindle, Apple later announced that the price will be adjusted to be similar to that on the Kindle. Interestingly, Macmillan -- and probably other publishers -- renegotiated their deal with Amazon, insisting on shifting to the agency model also. See Amazon Reluctantly Agrees to Higher eBook Pricing, Amazon closes the e-book on Macmillan (FT article). and . Amazon bows to Macmillan over e-booksAt the end of the day, more competition for distributing books seems to have given more power to the publishers, and will eventually lead -- at least in the short run -- to higher prices for e-books.
This shows that the welfare analysis of bilateral oligopolies is complex and that entry on one side may lead to higher prices through what can be called a "bargaining effect."
30 Jan 2010 - 11:17
According to DigiTimes Sstems, some manufacturers of tablet PC have reevaluated the prices of their products following Apple introductory pricing of the iPad. The article points out that these vendors initially intented to price their product 20-30% lower than the iPad, suggesting indeed that the industry is looking at Apple as a price leader. See also Tablet Manufacturers Reevaluating Pricing Options in Light of iPad Announcement.
29 Jan 2010 - 08:58
The introduction of the Apple iPad is seen by firms already offering eReaders as a positive: rather than being afraid that Apple will eat their market share, the competitors hope that the iPad will create a demand push for such devices. Hence, even if Apple gets a lion share of the increasing market -- like they did with the iPod and the iPhone -- the increased demand will benefit all. See a recent Financial Times article on this.
1 Dec 2009 - 08:57
State aids, subventions to local champions or beauty contests favoring national firms through "hidden criteria" are prevalent and are scrutinized by competition authorities. Two recent examples follow.
- Prefence given to national bidders, even if their bid was inferior to those of competitors: bid for state-owned nuclear group Areva in France where Alstom and Schneider Electric won against GE and Toshiba. See areva bid.pdf
- France Telecom recently lost another appeal European courts against the Euroepan Commission for repayment of €1bn of state aid given by the French government between 1994-2002; see france telecom state aid.pdf
1 Dec 2009 - 09:11
A monopsony is a firm that has market power on its suppliers. The distortions in the supplier market are similar to those observed in product markets under monopoly but are less often in the media or in antitrust cases. A recent Korean newspaper suggests that Apple is able to manipulate the supply of flash memory because of his large demand for its iPods and iPhones. See Apple accused of manipulating Flash memory prices.
13 Nov 2009 - 11:01
November 13, 2009
It went fast: Intel and AMD settled their dispute with Intel agreeing to pay $1.25 billion to AMD. It seems that the announcement had some effect on the market: AMD shares rose 21.2% percent while Intel went down by 0.9%.
5 Nov 2009 - 12:40
Intel is currently facing different legal challenges. The FTC and the attorney general are investigating Intel for bribery (taking the form of rebates to big PC sellers like Dell) and for attempts to monopolize the industry. The EU already fined Intel for 1.1 billion dollar. The main competitor of Intel is AMD and this company had a few years back the opportunity to eat some of the market share of Intel. After the law suits announcements, the share values of Intel and AMD barely moved however, suggesting that the window of opportunity for rebalancing market shares has passed and that the antitrust suits will only provide (possibly) compensation to AMD but without significant change for consumers.
5 Nov 2009 - 11:54
Drugs are sold at different prices in different EU countries; prices are often set via negotiation between the state and the pharmaceutical drugs and reflect the importance of the social security system, the bargaining powers of the different parties. Arbitragers can therefore buy drugs in countries with low prices and resell them in countries with high prices and make a profit; this (legal) practice is called "parallel trade". The amount of parallel trade for pharmaceutical drugs is of the order of 10% of the total sales in Europe. This puts limits on the ability of firms to price discriminate across countries. Recently (see the FT article http://www.ft.com/cms/s/0/cdc5066a-c7d1-11de-8ba8-00144feab49a.html ), the French government is introducing a law proposal by which pharmaceutical drugs will be able to charge a higher price locally for drugs that are exported, effectively cutting down on the ability of arbitragers to earn profits.
28 Oct 2009 - 10:59
In the article The NFL Should Auction Possession in Overtime Games, ( The Economists' Voice: Vol. 6 : Iss. 9, Article 5) Che and Hendershott argue that auctions rather than a flip of the coin should be used to decide who will have the ball first in overtime play in football. It turns out that the likelihood of winning when one gets first possession of the ball is almost the same as if the winner was decided by the flip of a coin. Auctions -- here the bid is the field position (how far back the team will start) -- by contrast gives the "winner" a handicap that compensates the "loser" for not winning. The NFL moved in 1994 the kickoff spot by 5 feet, giving the receiving team (the "loser" in overtime draw) a better field position, something that an auction will replicate and ameliorate since how far back the winning team wants to go will be a function of the relative forces of the two teams.