Archive for March 2010
Conference announcement
The University of Louvain organizes a conference on international antitrust litigation in March. See here for more.
Google Books Settlement- It’s the search market, stupid!
As in most instances, this snowclone is a bit of an oversimplification: to be sure, the GBS brings to the fore extremely interesting issues such as those related to copyright law, privacy, or the function and limits of the class action mechanism, which are unrelated to the competitive impact of the GBS on the search market. However, also like in most instances, it helps us not lose sight of the important stuff. Indeed, the antitrust objections to the settlement raised by the DOJ other than those dealing with the search market (fundamentally those related to the ASA’s pricing system) seem to me somehow weak (see first comment to this post below).
As Gary Reback –one of the most prominent leaders of the opposition to the settlement- noted in a blog post last week: “at bottom, the Google Book Settlement is not really about books. It’s really about search, the most important technology in the new economy”. The transcript of the fairness hearing held last week conveys the impression that the DOJ shares the same main concern.
I’m no expert on the GBS and wouldn’t dare to comment on all of its aspects here. However, some of the issues raised in Reback’s post caught my attention.
Reback’s post points out that the search market, allegedly dominated by Google (how do you define the search market? Note, for instance, that on the fairness hearing AT&T claimed to be Google’s competitor because of its Yellow Pages), is “difficult to enter because of powerful network effects and scale characteristics” . He then insists on how access to books covered by the settlement would grant Google a tremendous competitive advantage. The said advantage would stem from the fact that Google would be improving its ability to support “obscure” or “tail queries” by virtue of its “exclusive” (?) access to in-copyright books whose authors are unidentified (that’s what some have labeled as the “orphan works monopoly”, a term that not only assumes that there exists a market for “orphan works” and that competitors would be barred from accessing to such works, but which also, by putting together the words orphans and monopoly, adds a bit of Dickensonian dramatism to the debate). Read the rest of this entry »
Drawing Inferences from S&D Law
Many thanks for your answers. Some readers got it right, others not. To be fair, the question was poorly formulated, and many alternative explanations could apply.
Scott Summer from the Money Illusion provides the answer, and comes back on the question:
I teach at an institution that is well above average, and here is what I have found. Almost every single student comes into EC101 knowing the impact of supply and demand shocks. Tell them a frost hits the Florida orange crop, and they can explain what happens to the price of oranges. Tell them millions of Chinese start buying cars and they can tell you what happens to the price of oil.I also find that almost no student comes into my class knowing how to interpret price and quantity data. And what is worse, they leave the course equally ignorant. I often ask the following question to upper level econ or MBA students who have already taken principles:Question: A survey shows that on average 100 people go to the movies when the price is $6 and 300 people go when the price is $9. Does this violate the laws of supply and demand?Very, very few can answer this question, especially if you ask for an explanation. Even worse, I think there is a perception that there is something ‘tricky’ about this question, something unfair. In fact, it is as easy a question as you could imagine. It’s basic S&D. It’s merely asking students what happens when the demand for movies shifts. I cannot imagine a less tricky question, or a more straightforward application of the laws of supply and demand. In the evening hours the demand for movies shifts right. Price rises. Quantity supplied responds. What’s so hard about that? And yet almost no student can get it right. Our students enter EC101 knowing one of the two things they need to know about S&D, and they leave knowing one of the two things they need to know about S&D. Maybe instead of having them memorize mind-numbing lists of “5 factors that shift supply,” and “5 factors that shift demand,” we should just tell them to read something that will explain what economics is all about, something that portrays economists as detectives trying to solve the identification problem, something like Freakonomics.
(Image possibly subject to copyrights: source here)
Chillin'Competition 
