Market definition with differentiated products: a spatial competition application

This paper applies the ‘hypothetical monopolist’ test of market definition to a retail market with products differentiated by means of location and other dimensions. The test for defining the relevant product and geographic market follows the conditions required by the European Union Competition Law and so it takes into account both demand- and supply-side substitution. The empirical model using sales data from a set of movie theatres in the North of Spain, incorporating the observed locations of consumers vis-à-vis the stores, shows that empirical tests of market definition may lead to an implausible (too restrictive) definition of the relevant market if supply-side substitution is not accounted for. It also shows that the main driver of competition in retail markets with differentiated products is not price but product characteristics.     

A legal approach to real estate crowdfunding platforms

In the context of a financial and housing crisis, accompanied by credit constraints, a new alternative has recently emerged for those wanting to invest in real estate markets: real estate crowdfunding. Crowdfunding, which was originally intended to fund social projects through donations or loans from a large pool of individuals via Internet platforms, has developed into a more sophisticated method of financing. This is the case of real estate crowdfunding, a type of equity crowdfunding that aims to make housing investment available to retail investors, although several hazards have been detected that make these investments less secure. This paper addresses these hazards, analyses the information provided by five Spanish crowdfunding platforms to retail investors and determines whether or not real estate crowdfunding platforms in Spain, as a sharing economy mechanism, are making a contribution to the development of the housing market.     

互联网行业反垄断执法中相关市场界定

对互联网产品进行相关市场界定是该领域反垄断执法的起点。互联网产品可初步区分为全新信息交换类产品和在互联网上销售的传统商品,两类产品的市场界定需分别重视纵向互联网行业内与横向传统行业同类产品的竞争关系。非合并案件中相关市场界定可作为确认供应商市场垄断地位的间接认定方法,不应阻碍对直接损害竞争证据的考量。单一价格标准方法在互联网产品市场界定中具有局限性,应注重创新因素的考量以及时间市场的界定,着重进行供给替代分析,并寻求市场界定可能的替代性方法。     

Mortgage credit risk in EU countries: Constraints on exploiting the single currency market

The adoption of a single EU currency market raises questions about how individual country mortgage policies are likely to affect the gains that can be realized from this larger market. We use an option pricing model to provide some perspective on this issue. We address questions such as how does the risk exposure of a mortgage guarantee program in one country compare with those in other countries? What kind of effects do any such differences or varying legal restrictions on lender recourse have? Do the programs help complete financial markets? That is, are the programs structured as unsubsidized financial intermediaries which help allocate risks? Or, are the programs essentially wards of the state which encourage risk taking? In short, we aim to provide a simple, tractable way to think about how individual country policies affect the ability to exploit the potential offered by the larger market. Our conclusions are three. First, when correctly structured, mortgage default insurance can be expected to reduce non-price rationing at an actuarially fair price. It follows that to the extent that such programs lead to more complete markets without subsidies they are also more efficient than are the many schemes now used which rely on subsidies to address mortgage market incompleteness. Second, considerable care must be exercised in the development of such instruments. In a number of countries the pricing policies do not appear to be prudent. The program terms imply either that regulators often expect a much safer economic environment than seems likely, or, alternatively, the programs have been conveying either unbudgeted subsidies or incurring contingent liabilities. Such liabilities have already been realized in Sweden, and the current exposure in the Netherlands as well as with the restructured program in Sweden, appear to be large. Finally, we find that the potential geographical risk diversification provided by the single currency market can be expected to reduce mortgage rates and improve risk allocation. However, legal, fiscal, and regulatory issues with respect to credit risk limit the ability to exploit this larger market.     

Evolving Market Efficiency with an Application to Some Bulgarian Shares

With new technically advanced methods and computers at our disposal, the efficient market hypothesis is once again being debated. At the same time, we are witnessing an unprecedented growth in both existing and new financial markets. These new markets are often in economies which have just recently embraced free market economics; we term these stock markets infant markets. Such stock markets are obviously not efficient in allocating the supply of savings to productive capital. We do not test whether or not these infant markets are informationally efficient, but instead examine whether and how they are becoming more efficient. We propose modelling the excess returns of individual securities using a multi-factor model with time-varying coefficients and generalised auto-regressive conditional heteroskedastic (GARCH) errors. If the markets are becoming more informationally efficient or the agents are learning, we would expect this to manifest itself as the time-varying coefficients becoming more stable as time increases. We test our model using data on four Bulgarian shares. First, we estimate an AR(2) model and a GARCH-M(1,1) model for the shares. Then, we estimated our AR(2) model with time varying coefficients and GARCH type errors. We find varying levels of efficiency and varying speeds of movement towards efficiency within our sample of four shares.     

Software and computer services — A report

The market for software and computer services is increasingly international. Many of the leading companies in the industry are expanding into foreign markets by setting up direct subsidiaries or acquiring local firms or granting licenses. Although there are no significant obstacles to internationalisation, as this report shows, some problems concerning access to public-sector markets, telecommunications and software protection still exist.     

Putting a price on drugs: An economic sociological study of price formation in illegal drug markets

Prices in illegal drug markets are difficult to predict. Based on qualitative interviews with 68 incarcerated drug dealers in Norway, we explore dealers’ perspectives on fair prices and the processes that influence their pricing decisions. Synthesized through economic sociology, we draw on perspectives from traditions as different as behavioral economics and cultural analysis to demonstrate how participants in illicit drug distribution base their pricing decisions on institutional context, social networks, and drug market cultures. We find that dealers take institutional constraints into consideration and search for niches with high earnings and low risks. The use of transactions embedded in social networks promotes a trusting form of governance, which enables strategic network management and expedient distribution but also uncompetitive pricing. Finally, dealers’ pricing decisions are embedded in three different cultures narratives: business, friendship, and street cultural stories, with widely varying implications for prices. Our findings demonstrate how an economic sociology of illicit drug distribution can extend insights from behavioral economics and cultural studies into a coherent criminology of illegal drug markets.     

Characteristics and dynamics of illegal firearms markets: Implications for a supply-side enforcement strategy

The question of whether the illegal firearms market serving criminals and juveniles can be disrupted has been vigorously debated. Recent research suggests that illegal gun markets consist of both “point sources” (ongoing diversions through scofflaw dealers and trafficking rings) and “diffuse sources” (acquisitions through theft and informal, voluntary sales). To the extent that systematic gun trafficking is an important source of weapons for criminals and youth, focused regulatory and investigative resources may be effective in disrupting the illegal flow. In this research, we use data on traced firearms to examine one aspect of the illegal gun market that holds the most immediate promise for focused supply-side enforcement efforts—close-to-retail diversions. We find that almost one-third of traceable crime guns were recently diverted from legitimate retail firearms commerce and that nearly one-third had two or more indicators of gun trafficking involving dealers, purchasers, and possessors. We discuss the implications of these findings for understanding illegal gun markets and for developing effective supply-side enforcement strategies.     

A review of telecom markets in the EU: What did the European Commission learn or not from the past?

The EU telecom regulation relies on a market-by-market sunset approach. In order to facilitate the market review of national regulatory authorities, the European Commission has offered two successive sets of recommended markets susceptible to ex ante regulation. The inclusion or exclusion of a recommended telecom market is analyzed on its competition conditions across the EU. Beginning in 2014 the European Commission published the draft third Market Recommendation. This article aims to give a critical evaluation of those recommended markets by surveying the competition situations on every telecom market in the EU Member States. It observes that while the drafted Third Recommendation makes a reasonable assessment for most telecom markets, it may not have appropriately addressed markets such as retail fixed access, wholesale call origination, wholesale fixed and mobile call termination, wholesale high-quality access, and wholesale broadcasting transmission.     

ANTITRUST ANALYSIS FOR THE INTERNET UPSTREAM MARKET: A BORDER GATEWAY PROTOCOL APPROACH

We study concentration in the European Internet upstream accessmarket. The possibility of measuring market concentration dependson a correct definition of the market itself; however, thisis not always possible, because very often in the Internet industryantitrust authorities lack reliable pricing and traffic data.We present an alternative approach based on the inference ofthe Internet operators' interconnection policies using micro-datafrom their Border Gateway Protocol (BGP) tables. We assess marketconcentration following a two-step process: first, we proposea price-independent algorithm for defining both the verticaland geographical relevant market boundaries; then we calculatemarket concentration indexes using two novel metrics. Theseassess, for each undertaking, its role both in terms of essentialnetwork facility and of wholesale market dominance. The results,applied to four leading Internet exchange points in London,Amsterdam, Frankfurt, and Milan, show that some vertical segmentsof these markets are highly concentrated, while others are extremelycompetitive. According to the Merger Guidelines, some of theestimated market concentration values would immediately fallwithin the special attention category.     

垄断力的认定——兼评《反垄断法》第十九条

垄断力的认定直接关系到目标企业的切身利益与反垄断法的实施，准确与否至关重要。我国刚通过的《反垄断法》第19条的规定，过于强调了规模在垄断力认定中的地位，容易给人以误导。在垄断力的认定过程中，首要的考虑因素是目标企业的市场份额，其核心是确保相关市场界定的准确性；同时，我们还必须考虑该相关市场进入的难易程度、技术与技术创新的可行性以及国家的国际竞争力等诸多其他因素。     

The Structure of Social Practices and the Connection between Law and Morality*

In his work, Jules Coleman has held that the rule of recognition, if conceived of as a shared cooperative activity, should be the gateway through which to incorporate moral constraints on the content of law. This analysis, however, leaves unanswered two important questions. For one thing, we do not know when or even why morality becomes a criterion of legality. And, for another thing, we still do not know what conception of morality it is that we are dealing with. In this article, we will attempt to clarify in greater depth what relations there are between the social practice of law and morality. We will thus see how the cooperative nature of social practices imbues law with a moral force, and how this makes it possible to establish a “weak” connection between law and morality: To see this, we will need to single out some basic features of cooperative social practices, thus setting out a suitable framework for the view just mentioned.     

Competition by regulation in energy markets: the case of Turkey

A fundamental question facing the regulatory and competition authorities is whether to delegate competition policy issues of utilities to regulatory agencies or competition authorities. While, some countries prefer ‘light handed regulation’ by competition authorities, others grant substantial power to independent regulatory agencies. Turkey followed the liberalization wave in electricity with a regulatory reform in 2001. Recently, a slight shift of tide has appeared in previously liberalized markets. Electricity markets are the forefront example of this change of course. A similar trend is apparent in Turkey as well. Increasing pressures on prices and excess demand have created more reasons for active government involvement. As political factors weigh in, economic considerations take a secondary place in electricity markets. In order to show the tension between political and economic preferences, we use the Pareto and Kaldor-Hicks criteria of welfare economics metaphorically. This paper discusses the scope of competition policy in the Turkish electricity industry. We focus on the issue of regulatory governance. The absence of a well established institutional environment reduces the potential role of competition policy in the industry and increase political meddling in all segments of the Turkish electricity market. By looking into changes in prices, market power and new entry closely, we discuss the relative success of the regulatory reform in the electricity industry. We conclude by emphasizing the consequences of a passive competition authority in establishing a competitive electricity market.     

The Harmonisation of Rules of Conduct in EU Financial Markets: Economic Analysis, Subsidiarity and Investor Protection

The rules that regulate the market conduct of traders and the conduct of the business of investment intermediaries in the context of financial markets have not been comprehensively harmonised in the EU. As a result, cross-border trading in financial products and provision of other financial services is regulated by largely asymmetrical national rules. Host state regulators have remained responsible for the supervision of the compliance of banks and investment firms with national rules of conduct when they engage in the cross-border provision of banking and investment services. However, the advent of both the EMU and global trends in the financial services industry have transformed the market landscape. The regulatory challenges that recent market developments pose require a more efficient supervisory regime and a harmonised regulatory environment. These points were focal in the Commission's recent Communication, entitled 'Action Plan for Financial Markets'. This article examines the current regulatory framework in the area of market conduct and conduct of business in the EU. It argues, with the aid of economic analysis, for the harmonisation of rules of market conduct and for the further harmonisation of conduct of business rules at retail investor level. The harmonisation of conduct of business rules goes beyond the Commission's plans and might raise issues of Community competence. However, such harmonisation is dictated by the challenges of investor protection that changing market conditions create. Also, the transaction costs associated with indirect fragmentation inhibit the growth of cross-border trade in this area.     

Contracts, Investment Incentives and Efficiency in the Restructured Electricity Market

The paper highlights and analyzes the tension between designing power sale agreements that reduce uncertainty for the private investors and running the power systems as more efficiently as possible in the restructured electricity market. The features of such agreements are preliminary in resolving this tension and, therefore, in orienting the development of electricity markets restructuring towards a competitive direction. We define a theoretical contractual model, highlighting the tension between the two opposite directions: reducing uncertainty and risk in order to attract private investment and operating the power system efficiently. We apply the theoretical model for analysing the formal structure of a selected sample of power purchase agreements, really operating in the restructured electricity markets all over the world. We show how competitive contracting can increase efficiency pressures and, at the same time, increase investment risk. We then discuss some policy implications for the design of power purchase contracts in the restructured electricity market.     

“The times have changed,the dope has changed”: Women's cooking roles and gender performances in shake methamphetamine markets*

Drug markets are typically portrayed as male dominated, with men occupying the higher positions and women fulfilling the lower positions. Yet, the results of recent work highlight how women's participation and experiences in drug economies varies by the structure and organization of the specific market. We focus on the shake‐and‐bake (“shake”) methamphetamine (meth) market, which seems to have emerged mainly in response to legal attempts to curtail methamphetamine production. We explore how women adapt to structural changes and how they perform gender to navigate a market in which the focus is on personal consumption instead of on monetary gain. By relying on semistructured interviews with 40 women who cooked meth, we identify the gendered strategies they adopt and how these coincide with their position in the drug market. Cooking roles took three forms (partner, lead, and team), and each role was characterized by distinct patterns of gender performance and autonomy (emphasized femininity, matriarchal control, and gender neutral). We show that certain market conditions allow for increased participation among women in meth manufacturing. Yet, even within favorable conditions, variability remains in women's positions and gender performances. The findings highlight the role of organizational and legal context in shaping both the roles women adopt in drug markets and the ways they perform gender.     

Regulation as a cause of firm fragmentation:the case of the Spanish construction industry

Team members organize their relationships to achieve efficient incentives in accordance with institutional constraints. When these constraints change, the rights and tasks of members are reallocated, generating a new contractual structure [or governance mechanism] that solves more easily the problem of collective action associated with team production. We show how this process has worked in the case of Spanish construction firms, in which more restrictive labor and tax regulations have induced parties to substitute market contracts for labor contracts because of the need to avoid moral hazards. We argue that this explains the increased fragmentation of the Spanish construction industry, and technical change does not seem to account for this process.     

THE PERCEIVED SIZE OF SMALL BUSINESS BANKING MARKETS

Definition of markets is fundamental to any analysis of competitionand is the first step in enforcement of antitrust statutes.In the banking industry, geographic market definitions havebeen the subject of considerable discussion in recent years.This paper utilizes a survey conducted by the National Federationof Independent Business Research Foundation in 2001. The surveyasked a variety of questions relating to American small businesses'experience with financial institutions, including a questionasking how many banks were in the market area where the smallfirm did most of its business. Using the zip code of the surveyrespondent, this answer was compared with the number of banksin the same county, in the same metropolitan area, or in thelocal banking market as defined by the Federal Reserve. Theresults show that both urban and rural markets as perceivedby small businesses are considerably smaller than markets asdefined by either the US Department of Justice or the FederalReserve.     

Coasean markets

Coase’s work emphasized the economic importance of very small markets and made a new, more marginalist form of economic “institutionalism” acceptable within mainstream economics. A Coasean market is an association of persons with competing claims on a legal entitlement that can be traded. The boundaries of both Coasean markets and Coasean firms are determined by measuring not only the costs of bargaining but also the absolute costs of moving resources from one place to another. The boundaries of a Coasean market, just as those of the Coasean business firm, are defined by the line where the marginal cost of reaching a value-maximizing bargain by trading inside just equals the marginal cost of going outside. This focus on very small markets is a defining characteristic of modern Transaction Cost Economics. In analyzing such markets Coase ignored the eclectic, historical and behaviorist approach of the old institutionalists and applied the greater formalism and of marginal analysis. In the process, however, Coase assumed away important issues that the first generation of institutionalists were trying to address and created some new ones, such as how equilibrium is attained in Coasean as opposed to neoclassical markets. The most important difference between the two is that a Coasean market requires the unanimous consent of all participants before a trade can be made—a condition imposed by Coase’s own requirement of reciprocity, developed in The Problem of Social Cost (J Law Econ 3:1, 1960). The equilibrium problem is substantial but its significance has not been sufficiently developed. As a result, Coasean analysis of the business firm has made much more progress than has Cosean analysis of markets for legal entitlements. Further, the superiority of private governance over legislation, an important attribute of Coase’s argument, loses much of its force as the number of participants in Coasean markets increases beyond two. Research on the management of commons resources has contributed greatly to our understanding of when private resource allocation decisions by larger groups of owners succeed and when they fail. While not all common resources markets are of the kind contemplated by Coase they share many relevant characteristics. Further, the economic literature on private governance arrangements for the commons has found it necessary to step beyond the strict marginalist methodologies of Coasean economics and look more broadly to the historical, biological and social motivations for human cooperation.