The Role of Economics in Competition Law & Practice
The objective of this course, organised by the Jevons Institute for Competition Law and Economics at UCL, is to introduce the economic theories that underlie competition law and the methods that are used to assess whether business practices are nefarious, benign, or healthy. This year it is taught by Dr. Andrea Coscelli, Director of Competition Economics at Ofcom, and Professor David S. Evans who teaches at University of Chicago as well as University College London. During the year, there will be guest lecturers primarily drawn from current or ex-officials of competition authorities as well as judges and visiting academics.
The course consists of two parts:
The first part involves an introduction to microeconomics and industrial organization theory. It provides a basic introduction to the economics of markets including how firms maximise profits, the theory of demand, the role of costs, perfect competition, monopoly, oligopoly, product differentiation, vertical relationships, and multi-sided markets.
The second part involves the application of economics to competition policy. It includes the analysis of market power, market definition, cartels and other coordinated behaviour, unilateral conduct including predatory and exclusionary practices, horizontal and vertical mergers, two-sided markets and the web economy, and antitrust and intellectual property. The course is designed to provide students with a deep understanding of how economics is applied to competition policy as well as practical tools for applying this to cases.
Although both parts provide a rigorous introduction to the topic, the course does not require students to have any previous coursework or knowledge of economics and does not require students to a know anything beyond very basic math. Lectures rely on graphs and verbal descriptions to convey key concepts. Typical students generally have undergraduate degrees in law or other liberal arts subjects. Most students who take the course go on to practice as competition lawyers or in another field of law in which knowledge of economics is helpful.
Economics of Competition Policy
Dimensions of competition—price, quality, innovation. Types of competition - static vs. dynamic. Economic objectives of competition law. Demand and supply. The role of economics in competition policy. The use of the error-cost framework to derive competition uses.
Firms and Profit Maximisation
Demand; costs; profit maximisation; monopoly and the measurement of market power; the Lerner (price-cost margin) index and its application to the analysis of market power.
Demand, Supply and Static Competition
Supply and demand and the notion of equilibrium. Comparison with monopoly. The use of the demand and supply framework to predict changes in prices and output (comparative statics).
Market Power and Welfare
Consumer and social welfare; static versus dynamic analysis of welfare; implications of market power and welfare for identifying anticompetitive practices.
Oligopoly and Game Theory
Role of oligopolies in economy; introduction to game theory; Cournot and Bertrand models of oligopoly; dynamic games; application of game theory to predicting unilateral effects in mergers.
Cartels and Other Coordinated Practices
Replicating monopoly outcome; incentives and ability to cheat; facilitating factors for cartels; detecting and discouraging cartels; tacit collusion; estimation of damages and assessment of fines for cartels.
Product Differentiation and New Products [bonus lecture]
Horizontal and vertical differentiation; economic models of product differentiation; automobile industry
Market Definition and the Analysis of Market Power
Background on case law and economics; demand and supply substitution; hypothetical monopolist test; critical loss analysis; factors that enhance or reduce market power; dominant firm with competitive fringe model.
Legal and economic framework; unilateral effects; the role of diversion ratios; merger simulation models including upward pricing pressure; coordinated effects; analysis of efficiencies.
Pricing Strategies and Abuses
Price discrimination; limit pricing; predatory pricing; loyalty rebates
Economics of Vertical Relationships and Integration
Supply chains and ecosystems; types of business organizations; double marginalization; principal agent issues; vertical restraints; product design and tying.
Vertical Foreclosure and Mergers
Anticompetitive tying; vertical foreclosure incentives and single-monopoly profit theorem; ability to engage in vertical foreclosure; vertical mergers
Economics of two-sided markets; business strategies; market definition; anti competitive strategies; introduction to web economy and internet-related antitrust cases.
Antitrust and Intellectual Property [bonus lecture]
Economics of intellectual property; anticompetitive strategies involving patents
About the teachers:
Andrea Coscelli is a Director of Competition Economics at Ofcom in London. He joined Ofcom in December 2008 from Charles Rivers Associates (CRA) where he was a Vice President in the Competition Practice. He previously worked at economic consulting firms Lexecon (acquired by CRA in 2005) and NERA. He holds a PhD in Economics from Stanford University and first degree in economics from Bocconi University in Milan. He is a frequent speaker at European antitrust conferences and has published articles in a number of journals including the Journal of Econometrics, Journal of Industrial Economics and the European Competition Journal.
David S. Evans is an economist who holds academic positions at the University of Chicago Law School, where he is a Lecturer, and at the University College London where he is Executive Director of the Jevons Institute for Competition Law and Economics and Visiting Professor.
He is a specialist on competition policy in the US and European Union, a topic on which he has written and lectured extensively. He is also an authority on the economics of high technology businesses and two-sided markets, particularly as it relates to competition policy and intellectual property. He is the author or editor of seven books, most recently, Trustbusters: Competition Policy Authorities Speak Out (edited with Frederic Jenny), and more than 100 articles or book chapters. His works have appeared in the American Economic Review, Antitrust Law Journal, Foreign Affairs, and The University of Chicago Law Review among other places. Professor Evans is also the Editor-in-Chief of Competition Policy International, a peer reviewed, academic journal that covers antitrust law and economics.
Dr. Evans has a Ph.D.in Economics from the University of Chicago.
Teaching method and assessment
The teaching method is by two-hour seminars, conducted as part lecture and part discussion.
Students will therefore be required to read material in advance and come to seminars prepared to participate in class discussion. Practitioners will be given a Certificate of Attendance at the end of this course and do not sit examination or other assessments.
When is it being held
14 x 2 hours tuition
October 2010 - March 2011
UCL Faculty of Laws
Tel: 020 7679 1514
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