Competition policy

Julia Levine, Stephan Seiler, 23 January 2022

Consumers tend to be loyal to products they have purchased in the past, which companies may exploit to raise prices. To better understand whether this brand loyalty is driven by preferences or state dependence, this column looks at how households react when stockouts due to hurricanes force them to purchase different brands of bottled water. The authors do not find evidence of state dependence in bottled water brand. Although there is a large and significant decrease in loyalty during the stockout weeks, there is no effect in the post-hurricane period.

Martin Gaynor, Adam Sacarny, Raffaella Sadun, Chad Syverson, Shruthi Venkatesh, 16 January 2022

Despite the current wave of US hospital mergers, it is unclear how they change behaviour and performance. This column ‘opens the black box’ of hospital practices by analysing a mega-merger between two for-profit chains. Benchmarking the merger’s actual effects against the acquirer’s stated aims, its shows that while the merger achieved some goals – harmonising electronic medical records and sending managers to target hospitals – it produced few gains in overall performance. Further research is needed into the impact of mergers on the healthcare industry specifically and the economy more broadly.

Pauline Affeldt, Tomaso Duso, Klaus Gugler, Joanna Piechucka, 10 January 2022

The majority of large horizontal mergers are unconditionally cleared by antitrust authorities. Since most horizontal mergers generate incentives to increase prices and/or reduce output, the presumption seems to be that the resulting efficiencies must be sizeable to make them good for consumers. This column uses a novel database covering over 1,000 mergers scrutinised by the European Commission and shows that, under certain assumptions, compensating efficiencies appear too large to be achievable for a large part of the mergers in the sample. The Commission's view on required efficiencies might have been too optimistic and it appears to have been too lax in enforcing its merger policy.

Oriana Bandiera, Erica Bosio, Giancarlo Spagnolo, 30 November 2021

Covid-19 has served as a global case study for increased discretion in public procurement, with governments worldwide making rules more flexible to increase spending, reduce the damage, and save lives. A new CEPR eBook examines the tension between rules and discretion in public procurement and the steps that can be taken to improve procurement outcomes and mitigate the risk of corruption, collusion, abuse, and incompetence during crises. 

Daron Acemoğlu, 23 November 2021

Over the last decade, artificial intelligence has made great advances and influenced almost all industries. This column argues that the current AI technologies are more likely to generate various adverse social consequences, rather than the promised gains. It provides examples of the potential dangers for product markets, labour markets, and democratic institutions, and emphasises that the main problem is not AI itself, but the way leading firms are approaching data and their use. Policy should focus on redirecting technological change to create new capabilities and opportunities for workers and citizens.

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