Competition policy

Vitezslav Titl, Benny Geys, 13 January 2019

Despite public concerns about the role and influence of big donors on politics, questions remain regarding the mechanisms behind political favouritism to donor corporations. Using 2006–2014 data on political donations and public procurement allocations in the Czech Republic, this column finds that firms that increase their donations to a political party see the value of their public procurement contracts rise in the following year. Contracting authorities appear to engage in different forms of strategic behaviour to favour corporate donors, who tend to face fewer competitors in more regulated and open procurement procedures.

Hans Koster, Jos van Ommeren, Nicolas Volhausen, 20 December 2018

Short-term rental platforms such as Airbnb have grown spectacularly in recent years, and local governments around the globe have responded differently in regulating such rentals. This column analyses the effects of a policy change in several cities of Los Angeles County that restricted short-term rentals of entire homes and apartments. Airbnb has led to an increase in house prices that is particularly pronounced in popular tourist areas, and homeowners in these areas lose out from the regulation. Renters, on the other hand, benefit from the regulation.

Guangyu Cao, Ginger Jin, Xi Weng, Li-An Zhou, 09 November 2018

Positive network effects may lead to winner-takes-all in some markets. The column analyses dockless bike-sharing in China to show instead how an incumbent can benefit from positive spillovers from a competitor’s entry. In the case of bike-sharing, consumers multi-home, the market exhibits positive network effects, and investment by two firms is more cost-efficient than investment by one. 

Vsevolod Grabar, Konstantin Sonin, 20 October 2018

UEFA’s Financial Fair Play regulations, which aim to “introduce more discipline and rationality in club football finances”, have attracted significant criticism, with claims that their effect on competitive balance is uncertain and that they will deprive new clubs of a chance to take off. This column provides a theoretical argument to show that regulations such as salary caps or Financial Fair Play improve investors' incentives to bring money to clubs other than those in the top financial tier, helping to level the playing field.

Esteban Rossi-Hansberg, Pierre-Daniel Sarte, Nicholas Trachter, 19 October 2018

Recent literature has documented increasing US product-market concentration at the national level. This column argues that when measured at the more relevant local level, concentration has actually decreased over the last 25 years on average and in all major sectors. In the many industries with diverging national and local trends, top firms are bringing down local concentration even as they increase national concentration. These findings support the idea that top firms expand their national market share by opening establishments in new locations, thereby increasing local competition. 

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