Competition Policy and Economic Regulation

Code:

2ECON27

Acronym:

CPERS

Keywords
Classification	Keyword
CNAEF	Economics

Instance: 2014/2015 - 2S (of 18-02-2015 to 17-06-2015)

Active?	Yes
Course/CS Responsible:	Master in Economics

Cycles of Study/Courses

Acronym	No. of Students	Study Plan	Curricular Years	Credits UCN	Credits ECTS	Contact hours	Total Time
ME	4	Syllabus - english track	1	-	7,5	56	202,5

Teaching language

English

Objectives

This course aims at investigating the main economic issues on competition policy and regulation, applying theoretical and empirical industrial organization models.

In the first part, the course analyzes and evaluates important topics such as collusion, mergers and exclusionary practices, with applications to recent cases decided by worldwide competition authorities.

In the second part, the course addresses the major changes in regulatory policy, which have led to the privatization of a number of state-owned monopoly industries and the introduction of competition. The course intends to be a primary source of information for students regarding modern regulatory instruments, such as price cap, yardstick regulation, or access pricing.

Learning outcomes and competences

In the end of the course, students should be able to (i) understand the foundations of competition policy and economic regulation; (ii) create simple models that evaluate competition policy interventions; (iii) evaluate the results of regulatory agencies’ decisions; (iv) analyze, critically discuss and compare competition policies and regulatory activity implemented in practice, worldwide.

Working method

Presencial

Pre-requirements (prior knowledge) and co-requirements (common knowledge)

Microeconomics. Industrial Organization.

Program

I. Economic Regulation 

1. What is Economic Regulation? An introduction

2. Regulation of Natural Monopoly

2.1 Ramsey pricing

2.2 Rate of return

2.3 Incentives in regulation

2.3.1 Price cap

2.3.2 Yardstick regulation

2.4 Peak load pricing

2.5 Case studies

3. Franchise bidding

3.1 Competition at the Bidding Stage

3.2 Contractual Arrangements for the Post-bidding Stage

3.2 Assessment of Franchise Bidding

3.4 Case study

4. Regulation in network industries

4.1 Access pricing

4.2 Interconnection

4.3 Efficient component pricing rule

4.4 Case study

5. Sector regulation

5.1 Electricity

5.2 Natural gas

5.3 Telecommunications

5.4 Transports

II. Competition policy

1. What is Competition Policy? An introduction

2. Market power and welfare

2.1 Market definition: theory and practice

2.2 Measurement issues

2.3 Case study

3. Collusion

3.1 Horizontal agreements and price fixing

3.2 Joint ventures

3.3 Case study

4. Horizontal Mergers

4.1 Unilateral effects

4.2 Pro-collusive effects

4.3 Merger remedies

4.4 Case study

5. Vertical mergers and vertical restraints

5.1 Intra-brand competition

5.2 Inter-brand competition

5.3 Exclusive dealing: leverage and foreclosure

5.4 Case study

6. Abuse of dominance

6.1 Price discrimination

6.2 Predatory pricing

6.3 Exclusive dealing, loyalty discounts, rebates

6.4 Tying and bundling

6.5 Refusal to deal

6.6 Network effects and two-sided markets

6.7 Case studies

Mandatory literature

Motta, Massimo; Competition policy. ISBN: 978-0-521-01691-9
Viscusi, W. Kip; Economics of regulation and antitrust. ISBN: 0-262-22049-0
Church, J. and Ware, R. ; Industrial Organization - A Strategic Approach, McGrawHill, 2000

Complementary Bibliography

Belleflamme, Paul; Industrial organization. ISBN: 978-0-521-68159-9

Comments from the literature

Selected Papers:
Armstrong, M., 2006, ”Competition in Two-Sided Markets," Rand Journal of Economics, 37(3): 668-691.

Armstrong M, Doyle C, Vickers J , 1996, “ The access price problem: a synthesis”, Journal of Industrial Economics, Vol. XLIV, 131–150.

Bester, H.andPetrakis, E., 1996, “Coupons and Oligopolistic Price Discrimination. International Journal of Industrial Organization, Vol. 14, 227–242.

Evans, D. 2003, "The Antitrust Economics of Multi-Sided Platform Markets," Yale Journal on Regulation, Vol. 20, 325-82.

Farrell, J. and Klemperer, P.2007, "Coordination and Lock-in: Competition with Switching Costs and Network Effects," in Handbook of Industrial Organization. Vol. 3. Edited by Armstrong, M and Porter, R.

Harrington, J., 2006, “How Do Cartels Operate?”Foundations and Trends in Microeconomics, Vol. 2,1–105.

Levenstein, M. C. and Valerie Y. Suslow, 2006, “What Determines Cartel Success?”, Journal of Economic Literature, Vol. 44, No. 1., 43-95.

Rochet, J. and Tirole, J. 2003,. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, Vol. 1(4): 990-1029.

Thisse, J., and Vives, X. 1988, "On the Strategic Choice of Spatial Price Policy." American Economic Review, Vol. 78, 122-137.

Vogelsang I, 2002, “Incentive regulation and competition in public utility markets: a 20-year perspective”, Journal of Regulatory Economics, Vol. 22, 5–27.

Teaching methods and learning activities

The course relies on a hybrid teaching methodology. We combine the theoretical exposition of the program contents with the presentation and the discussion of real cases. Students’ participation in class is highly encouraged, both in terms of (i) commenting/ questioning the empirical evidence and theoretical models exposed in class; and (ii) presenting to the class their own experiences regarding real cases relevant to the subjects under analysis.

Evaluation Type

Distributed evaluation with final exam

Assessment Components

Designation	Weight (%)
Prova oral	20,00
Teste	50,00
Trabalho escrito	30,00
Total:	100,00

Calculation formula of final grade

Students will be assessed on the basis of an individual coursework (written essay (30%) + class presentation (20%)) and a final exam (50%).