Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Assorted links

with 6 comments

  • Wouter Wils has a new paper on recidivism. I understand it will appear in World Competition. A question: Does Wouter have an exclusive supply agreement with Kluwer?;
  • At the GCLC we are DESPERATELY looking for a Commission official to come present the best practices on the conduct of proceedings in antitrust cases (101 and 102 TFEU) at a forthcoming lunch talk;
  • I gave a presentation on standardisation agreements, IP and competition law. See link thereafter for the ppt. Droit des brevets et droit de la concurrence – Accords de normalisation A paper is in the making;
  • A good New Yorker paper on why the current laudative discourse on small business is misguided;
  • And a rumination/question: what makes it that in some markets, the supplier pays for distribution (publisher-search engines, airlines-travel agents), and in other markets, the supplier sells to distributors (consumer goods-supermarkets)?

Written by Nicolas Petit

9 November 2011 at 8:18 pm

Posted in Uncategorized

6 Responses

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  1. Isn’t the theory of two-sided markets an illuminating one?

    Bagnole

    9 November 2011 at 10:44 pm

    • I would argue it’s not so much about two-sided markets. Note that paying a distributor a fee to supply a product is effectively just a form of agency or RPM.

      Ultimately, paying for distribution vs. selling to a distributor are but two forms on a continuum of distribution formats that range from full vertical integration to full vertical separation. Agency and RPM are somewhere in the middle of this spectrum, because they allow distributors some independent control over the final sale (e.g., over service levels) as under vertical separation, but not over all aspects (e.g. not over final price) as under vertical integration.

      The optimal level of vertical separation is determined by a wide range of economic parameters. For instance, RPM is sometimes chosen over resale and full vertical integration where a) distributor independence is important because it allows distribution of different products of different producers in one location (e.g., a supermarket), but where b) opportunism by independent distributors cannot be fully controlled through contingent contracts (say, because it is costly to specify, observe, or verify certain aspects of conduct). E.g., paying a retailer a fixed premium per sale (RPM) can provide a powerful incentive for distributors to promote the product. But obviously, there may be many other aspects why more or less vertical control can be efficient.

      Hans Zenger

      10 November 2011 at 3:20 am

      • Hans, what you mention is correct and of fundamental importance. My understanding is that Nicolas was pointing to something else than the (relatively straightforward) difference between agency and resale agreements.

        Bagnole

        10 November 2011 at 11:41 am

  2. To explain W. Wils’ heavy supply to World Competition?

    The more readers of WoCo => the more paper of WouWils = > the more readers of Woco … and so on 🙂

    Nicolas Petit

    9 November 2011 at 11:36 pm

  3. Well… sort of. Think of it as an example that is half way between the two you mention in your last question, i.e. as a situation in which the ‘supplier’ provides the article (sigh) for free (or for an insignificant amount)

    And, by the way, I think it would make a lot of sense for the platform to tie a star author like Wouter Wils through exclusivity: http://pages.stern.nyu.edu/~rslee/papers/ExclusivityAndControl.pdf

    Bagnole

    10 November 2011 at 8:34 am

    • Thanks guys. In reading Hans, I understand the answer hinges on principal-agent and incomplete contracts theories:

      When contracts can be designed so as to eradicate ex post agent opportunism, standard distribution agreements will be adopted. In those settings, the supplier will sell to the distributor (possibly with a RPM scheme to align principal and agent’s incentives).

      In the alternative (i.e. ex post opportunism cannot be prevented through contracts), the principal will seek more control. He will either rely on agency agreement and pay for distribution (more control), or will vertically integrate (full control). And I suppose that what determines the choice of one setting over the other has to do with coasian trade-offs.

      Nicolas Petit

      10 November 2011 at 7:18 pm


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