Competition Policy

TSE researchers have worked for many years in fields (such as industrial organization, corporate governance, finance, contract theory and incentives, network economics, intellectual property, and so forth) that are relevant for the supervision of regulated industries as well as for competition policy.  Many of them are moreover active in policy debates, through their writings or their involvement in advisory boards, and are often called upon as experts by competition authorities, courts and businesses. This is for example reflected in the involvement of three members of IDEI in the Economic Advisory Group on Competition Policy at DG-Competition (ref: "the economics of tacit collusion"; "The economics of unilateral effects"), where they have been active in helping to shape the more economic approach to competition policy espoused by the European Commission, the frequent citation of work by TSE researchers in such areas as two-sided markets and in cases and policy papers put out by the major competition and regulatory agencies, or the presence of senior figures from the policy-making community at numerous conferences and round tables organized by TSE researchers.

Here are a few examples of specific areas of expertise:

  • Industrial Organization, Regulation and Competition Policy
    The liberalization of historically regulated markets such as energy, telecommunications, postal services or transportation generates hot debates on the role and conditions of competition in these industries. Access to infrastructure such as electricity grids or gas pipelines, telecoms local loops or postal delivery, for example, calls for delicate balances between the need to promote investment and efficient management of the infrastructure, on the one hand, and entry in those market segments where competition can take place. TSE research has studied the organization of these industries, on the design of the rules must regulate them as well as on the strategies of existing operators and potential entrants. Examples of relevant output include the theory of incentive regulation, which aims at aligning firms’ incentives and strategies with the public interest, the interplay between wholesale mobile termination charges and retail competition, the design of efficient capacity markets for electricity, or the division of tasks in rail transport.

  • Two-sided markets
    Many industries are subject to “network” or “club” effects. For example, the number of people already using a given word processing software matters when deciding which word processing software to buy, as it may be easier to communicate and exchange using the same software. In a related vein, when mobile operators charge lower prices for on-net calls, the size of their customer bases matters, as it affects the proportion of cheaper calls. But in some industries, what matters is the number of participants on “another side” of the market. For example, users of payment cards do not care about the number of other cardholders, but about the number of shops accepting the card; conversely, shopkeepers do not care about the number of shops accepting the card, but do care about the number of consumers that may be willing to pay using the card. Similarly, advertisers care about the number of consumers they can reach, sellers care about the number of prospective buyers that may visit an online auction site, and so forth. Such “two-sided” industries raise specific issues, which TSE researchers have been among the first to identify and study. For example, determining how the cost of a transaction should be shared between the two sides, depends not only the demand elasticity on each side, but also on the externality that each side exerts on the other. This, in turn, has led regulators, competition authorities as well as business practitioners to rethink their approach to these industries.

  • Innovation and Intellectual Property
    Industries such as telecommunications, Internet, and media, have been experiencing a very fast technological change for the last fifteen years, which raises key issues for investment incentives, technological progress and growth. TSE researchers analyze the stakes of intellectual property rights, their strategic value and their role as a component of innovation in competitive economies, as well at the determinants of firms’ investment strategies. Examples of advances in research thinking in which they had a pioneering influence include the economics of open source, particularly on indirect incentives that induce contributions to open source products, the economics of standard-setting and patent pools, Internet security, or the role of vertical and horizontal integration in affecting competition and innovation.

Recent conferences

  • Since 2001, TSE organizes bi-annual Conference on "The Economics of the Software and Internet Industries". The objectives of this conference was to discuss recent academic contributions to the economics of the Software and Internet Industries, whether theoretical, econometric, experimental or policy oriented. The Sixth bi-annual Conference on The Economics of Intellectual Property, Software and the Internet Industries took place on 13-14 January 2011.

  • IDEI organized the Seventh bi-annual conference on The Economics of the Postal Sector in the Digital World sector sponsored by La Poste on March 22-23, 2012. The scope and objectives of this conference was to discuss recent theoretical research dealing with competition, regulation and universal service in the postal sector, then to discuss applied research and recent issues in the postal, and finally to provide a forum of discussion and dialogue between practionners and academic researchers. The conference focused on many topics such as industrial economics and econometrics of the postal sector, access and competition, demand analysis and the market of mail, Service of General Economic Interest, Universal Service and competition, cost and pricing, the postal sector in developing countries, sustainable development and responsible growth, and two-sided markets and mail media.

IDEI

Founded by Jean-Jacques Laffont in 1990, the Institut d'Economie Industrielle (IDEI) is a research center in economics which serves a dual purpose:
• Allowing TSE researchers to be competitive at an international level;
• Providing administrations and companies with an interface between their activities and economic research.

Through its research partnerships with administrations and companies, IDEI tackles both theoretical and applied economic problems and supplies state-of-the-art tools to decision-makers in eight areas:
• Industrial Organization, Regulation and Competition Policy,
• Innovation and Intellectual Property,
• Insurance, Banking and Finance,
• Energy, Environment, Agriculture,
• Macroeconomics, Growth and International Economics,
• Economics of Developing Countries and in Transition Countries,
• Methodology: Econometrics, Statistics and Economic Theory,
• Public Economics, Health, Labour and Education.

IDEI develops four distinct activities:
• Basic research: IDEI develops formal models for analyzing, interpreting and understanding industrial structures and the behavior of economic agents.
• Applied research: IDEI develops customized methodologies designed for decision assistance for companies based on their own specific data; the Institute's expertise is provided through technology exchange.
• Conferences and Seminars: IDEI offers an international forum for debates between theorists and practitioners focused on economic problems. Both groups are able to exchange and examine their ideas outside of the institutional framework.
• Training: IDEI organizes training sessions for company managers in the areas necessary for mastering the mechanisms of economy and of finance.