Competition policy

Mark Schankerman, Florian Schuett, 06 November 2020

In the last years, there has been substantial pushback against the patent system. Critics claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms. It finds that the current system generates positive social value, and that the recent introduction of the Patent Trial and Appeal Board increased welfare. Intensifying patent office examination and imposing antitrust limits on patent licensing agreements would yield additional welfare gains.

Erica Bosio, Simeon Djankov, Edward Glaeser, Andrei Shleifer, 05 November 2020

Discretion in public procurement allows public officials to pursue socially and economically optimal procurement outcomes, but it also increases the possibility of corruption. This leads to a trade-off between allowing greater discretion and preventing corruption in public procurement. Using survey data on public procurement law and practices from 187 countries in 2019, this column investigates this trade-off. It finds that regulation is helpful when government efficiency is low, and harmful when it is high.

Fernando Arteaga, Desiree Desierto, Mark Koyama, 25 October 2020

The Spanish Crown had a monopoly on the trade route between Manila and Mexico for more than 250 years. The ships that sailed this route were “the richest ships in all the oceans”, but much of the wealth sank at sea and remain undiscovered. This column uses a newly constructed dataset of all of the ships that travelled the route to show how monopoly rents that allowed widespread bribe-taking would have led to overloading and late ship departure, thereby increasing the probability of shipwreck. Not only were late and overloaded ships more likely to experience shipwrecks or to return to port, but the effect is stronger for galleons carrying more valuable, higher-rent cargo. This sheds new light on the costs of rent-seeking in European colonial empires.

Jorge Padilla, Joe Perkins, Salvatore Piccolo, 22 October 2020

Alleged market abuse by technology firms with large bases of loyal customers has become a pressing policy concern. This column argues that significant consumer harm can result from the attempts of these ‘gatekeeper platforms’ to gain revenue from their installed bases of platform users at the expense of third-party firms offering complementary services. The authors suggest possible ways forward for competition authorities currently considering new regulation of digital markets.

Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens, 13 October 2020

Aggregate firm concentration has increased in Europe in the last decade. Using firm-level data, this column shows that concentration is positively associated with productivity at the sector level. As a result, rising concentration should not be viewed as conclusive evidence of a weak competitive environment and need not necessarily be a cause for concern. Rather, rising concentration may be a reflection of more efficient market processes. This has important consequences for industrial and antitrust policy, which must carefully evaluate the costs and benefits of increasing concentration.

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