Economics at the Antitrust Division: 2017–2018

Abstract

This article describes some of the work of Antitrust Division economists over the past year, with a focus on modeling. It begins by illustrating the mapping from evidence to prediction using tools for assessing the effects of mergers using Bertrand, Cournot, and auction models. It then turns to two hot topics in competition policy: the implications of claims of increasing margins for merger enforcement and the validity of claims of increasing concentration. Finally, it considers how mergers affect prices in bargaining models.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2
Fig. 3

Notes

  1. 1.

    The Antitrust R Package includes functionality that is not currently accessible through the web interface. For instance, the web interface does not allow users to analyze partial ownership changes, the Bertrand model with linear or log-linear demand, or a second-price procurement auction model under different distributional assumptions for costs—all of which are capabilities of the Antitrust R Package.

  2. 2.

    R as well as the following R packages must be installed along with all of their dependent packages: antitrust, rhandsontable, and shiny R. Once these packages are installed, the R command line to run the web interface is: antitrust::antitrust_shiny().

References

  1. Aetna. (2017). United States v. Aetna, 240 F. Supp. 3d 1 (D.D.C.).

  2. Alexandrov, A., Pittman, R., & Ukhaneva, O. (2018). Pricing of complements in the US freight railroads: Cournot versus coase. In EAG discussion paper 18-1.

  3. Anthem. (2017). United States v. Anthem, Inc., 236 F. Supp. 3d 171 (2017) (D.D.C.), affirmed, 855 F.3d 345 (D.C. Cir. 2017).

  4. H&R Block, Inc. (2011). United States v. H&R Block, Inc., 833 F. Supp. 2d 36 (D.D.C.).

  5. Brannman, L., & Froeb, L. (2000). Mergers, cartels, set-asides and bidding preferences in asymmetric second-price auctions. Review of Economics and Statistics, 82, 283–290.

    Article  Google Scholar 

  6. Council of Economic Advisors. (2016). Benefits of competition and indicators of market power. https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160502_competition_issue_brief_updated_cea.pdf.

  7. Crawford, G. S., Lee, R. S., Whinston, M. D., & Yurukoglu, A. (2017). The welfare effects of vertical integration in multichannel television markets. Econometrica, 86, 891–954.

    Article  Google Scholar 

  8. de Fontenay, C. C., & Gans, J. S. (2014). Bilateral bargaining with externalities. Journal of Industrial Economics, 42, 756–788.

    Article  Google Scholar 

  9. Froeb, L., Koyak, R., & Werden, G. J. (1993). What is the effect of bid-rigging on prices? Economics Letters, 42, 419–423.

    Article  Google Scholar 

  10. Froeb, L., Mares, V., & Tschantz, S. (2018). Bargaining and mergers. Unpublished paper.

  11. Froeb, L., & Werden, G. (1998). A robust test for consumer welfare enhancing mergers among sellers of a homogeneous product. Economics Letters, 58, 267–269.

    Article  Google Scholar 

  12. Grullon, G., Larkin, Y., & Michaely, R. (2018). Are US industries becoming more concentrated? https://ssrn.com/abstract=2612047.

  13. Hausman, J. A., & Leonard, G. K. (1997). Economic analysis of differentiated products mergers using real world data. George Mason Law Review, 5, 321–346.

    Google Scholar 

  14. Hausman, J., Leonard, G. K., & Zona, J. D. (1994). Competitive analysis with differenciated products. Annales d’Economie et Statistique, 34, 159–180.

    Article  Google Scholar 

  15. Miller, N. H. (2014). Modeling the effects of mergers in procurement. International Journal of Industrial Organization, 37, 201–208.

    Article  Google Scholar 

  16. Nash, J. (1950). The bargaining problem. Econometrica, 18, 155–162.

    Article  Google Scholar 

  17. Nevo, A. (2014). Mergers that increase bargaining leverage. Unpublished speech, https://www.justice.gov/atr/file/517781/download.

  18. Padilla, J. (2018). Should profit margins play a more decisive role in horizontal merger control? Journal of European Competition Law & Practice, 9, 260–266.

    Article  Google Scholar 

  19. Pittman, R. W., & Werden, G. J. (1990). The divergence of SIC industries from antitrust markets: Some evidence from justice department merger cases. Economics Letters, 33, 283–286.

    Article  Google Scholar 

  20. Raskovich, A. (2003). Pivotal buyers. Journal of Industrial Economics, 51, 405–426.

    Article  Google Scholar 

  21. Sheu, G., & Taragin, C. (2017). Simulating mergers in a vertical supply chain with bargaining. In EAG Discussion Paper 17-3.

  22. Stole, L. A., & Zwiebel, J. (1996). Intra-firm bargaining under non-binding contracts. Review of Economic Studies, 63, 375–410.

    Article  Google Scholar 

  23. Sysco. (2015). FTC v. Sysco Corp., 113 F. Supp. 3d 1 (D.D.C.).

  24. Valletti, T., & Zenger, H. (2018). Should profit margins play a more decisive role in horizontal merger control?—A rejoinder to jorge padilla. Journal of European Competition Law & Practice, 9, 336–342.

    Article  Google Scholar 

  25. Werden, G. J. (1996). A robust test for consumer welfare enhancing mergers among sellers of differentiated products. Journal of Industrial Economics, 44, 409–413.

    Article  Google Scholar 

  26. Werden, G. J. (1997). Simulating the effects of differentiated products mergers: A practical alternative to structural merger policy. George Mason Law Review, 5, 363–386.

    Google Scholar 

  27. Werden, G. J., & Froeb, L. M. (1994). The effects of mergers in differentiated products industries: Logit demand and merger policy. Journal of Law Economics and Organization, 10, 407–426.

    Google Scholar 

  28. Werden, G. J., & Froeb, L. (2018a). Increased margins in merger assessment: No need to fret. Journal of European Competition Law & Practice, 9.

  29. Werden, G. J., & Froeb, L. (2018b). DON’T PANIC: A guide to claims of increasing concentration. Antitrust.

  30. Werden, G. J., Froeb, L. M., & Scheffman, D. T. (2004). A Daubert discipline for merger simulation. Antitrust, 18(3), 89–95.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Gregory J. Werden.

Additional information

The views expressed herein are not purported to reflect those of the U.S. Department of Justice.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Froeb, L.M., Pittman, R.W., Taragin, C.S. et al. Economics at the Antitrust Division: 2017–2018. Rev Ind Organ 53, 637–651 (2018). https://doi.org/10.1007/s11151-018-9663-7

Download citation

Keywords

  • Antitrust
  • Bargaining
  • Concentration
  • Mergers

JEL Classification

  • C78
  • K21
  • L40