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Economic Issues Papers
Economic Issues Series: Papers are literature reviews and analyses in areas of public policy concern involving issues similar to those addressed in the Commission's Competition and Consumer Protection missions. Economic Issues Series papers normally require a smaller commitment of Commission resources than Bureau Economic Reports.
The more recent Economic Issues Papers are offered in Adobe Acrobat PDF format. If you have trouble accessing one of these reports, please email ReportRequests@ftc.gov.
A Brief Primer on the Economics of Targeted Advertising
This paper provides an economic approach to thinking about targeted online advertising, specifically with regard to the collection and use of personal data to enable targeting. Restricting the collection of personal data necessarily limits the use of targeted ads by firms to reach potential customers. This paper considers the effects of moving away from data collection and targeted ads, with particular focus towards the effects on consumers, and discusses the theoretical and empirical research conducted to address this issue.
Patrick DeGraba, Patrick Greenlee, Daniel P. O’Brien,
This paper reviews the economic literature on “conditional pricing practices.” Conditional pricing practices are pricing strategies in which a seller conditions its prices on factors such as volume, the set of products purchased, or the buyer’s share of purchases from the seller. This short primer provides a unifying overview of the economic literature that addresses these practices. This paper was prepared as a background document for a 2014 Public Workshop on Conditional Pricing Practices co-sponsored by the DOJ and FTC.
This paper examines the costs and benefits of disclosing resort fees – which are per-room, per-night, mandatory fees charged by some hotels – separately from the room rate by reviewing the economics and consumer behavior literatures on drip pricing and partitioned pricing, two pricing practices used by online travel agents and hotels to disclose resort fees to consumers. Consumers and advocacy groups argue that the fees are misleading because they are not included in the room rate. Hotels argue that they provide resort services at a discount relative to the cost of purchasing the services individually, and that resort fees allow hotels to reduce the commissions paid to online travel agents. The analysis in the paper finds that separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations. The analysis finds that separating resort fees from the room rate without first disclosing the total price is unlikely to result in benefits that offset the likely harm to consumers.
Merger Efficiencies at the Federal Trade Commission 1997–2007
Malcolm B. Coate & Andrew J. Heimert,
The Federal Trade Commission and the Department of Justice significantly expanded the efficiencies section of the Horizontal Merger Guidelines in April 1997. The revisions broadened the scope of the analysis and clarified the framework for determining when claimed efficiencies should be recognized in merger analysis. This study reviews how FTC staff have treated efficiencies claims in the following ten years, considering 186 mergers in which the Commission staff completed a second request investigation, between April 1997 and March 2007.
Transparency at the Federal Trade Commission: The Horizontal Merger Review Process: 1996-2003
Malcolm B. Coate and Shawn W. Ulrick,
This paper empirically analyzes the Federal Trade Commission's merger enforcement decisions, to supplement the 2004 release of the Horizontal Merger Investigation Data. The study provides insights into the review process for both multi- and single-market mergers. We present concentration-based models, customized to the relevant industry, for mergers with large numbers of overlaps. When more detailed data is available (for mergers with 3 or fewer overlaps), the analyses also focus on additional factors. We find evidence to suggest that, in addition to market structure, verified customer complaints and entry considerations also affect the enforcement decision. Finally, the study notes that the Commission's enforcement policy has been stable during the 1996 through 2003 time period.
Quantifying Causes of Injury to U.S. Industries Competing with Unfairly Traded Imports: 1989 to 1994
Kenneth H. Kelly and Morris E. Morkre,
This study updates and extends the earlier 1994 BE Staff Report Effects of Unfair Imports on Domestic Industries: U.S. Antidumping and Countervailing Duty Cases, 1980 to 1988. First, it estimates the adverse effect of dumped and subsidized imports on domestic industries for 63 final cases decided by the U.S. during 1989-1994. Injury to domestic producers from unfairly traded imports is greater in 1989-1994 compared with 1980-1988. This increase is attributable in part to an increase in dumping margins. Second, the study estimates the effects of dumped and subsidized imports on workers and consumers. U.S. consumers gain at least $2.9 billion per year (1992 dollars) from dumped and subsidized imports. Consumer benefit per job lost ranges from a low of $27,000 to a high of $3.6 million. Third, the study measures how changes in demand and supply for the output of domestic industries that compete with unfairly traded imports have affected the performance of those industries. On average, a decline in demand is the single most important factor reducing output and revenue for these industries, and has a larger effect than unfairly traded imports.
This report provides a detailed overview of the body of economic research that is relevant to the Internet and Internet-based markets. The report provides an introduction to Internet technology and history and addresses four topics in particular: a) different methods of pricing user access, b) the pricing of goods and services sold via the Internet, c) network effects and firm behavior, and d) taxation of electronic commerce. Drawing on recent Internet-related economic scholarship, and more traditional studies of pricing practices and market structure, the report considers some possible antitrust implications for firms operating in this rapidly changing marketplace, as well as pointing to areas for future research.
This paper examines the costs and benefits of occupational regulation. Over 800 occupations arc licensed by at least one of the fifty states. When properly designed and administered, occupational licensing can protect the public's health and safety by increasing the quality of professionals' services through mandatory entry requirements — such as education — and business practice restrictions — such as advertising restrictions. This report finds, however, that occupational licensing frequently increases prices and imposes substantial costs on consumers. At the same time, many occupational licensing restrictions do not appear to realize the goal of increasing the quality of professionals' services. While the majority of the evidence indicates that licensing proposals are often not in the consumers' best interest, we cannot conclude that the costs of licensing always exceed the benefits to consumers. In considering any licensing proposal, it is important to weigh carefully the likely costs against the prospective benefits on a case by case basis.
The papers below are not available online. To receive a copy of one of these reports, please email ReportRequests@ftc.gov
1. A Review of Structure-Performance Studies in Grocery Retailing, Keith B. Anderson, June 1990.
This is a review of the literature on the effects of grocery retailing concentration on market performance. The review generally concludes that the existing structure-performance studies of this industry contain methodological and econometric weaknesses.
1. How Should Health Claims for Foods Be Regulated? An Economic Perspective, John E. Calfee and Janis K. Pappalardo, September 1989.
This policy analysis examines the application of a cost/benefit approach to health claims. It focuses on the problem that regulators tend not to ask one of the right questions: How much will it cost consumers if we do not allow a claim that turns out to be true?
1. Deregulation in the Trucking Industry, Diane S. Owen, May 1988.
This report examines the effects of the deregulation in the trucking industry that began with the Motor Carrier Act of 1980. It finds that the feared effects of reduced service to small communities, destructive competition, confusion among shippers, and unsafe trucks, do not appear to have occurred. It is explained that a comparison of benefit and cost estimates of various studies indicates that the competitive forces unleashed by the partial deregulation of trucking may have resulted in economic benefits outweighing costs by a factor of twenty to one.
2. The Deregulated Airline Industry: A Review of the Evidence, Jonathan D. Ogur, Curtis Wagner, and Michael G. Vita, January 1988.
This report summarizes the available evidence on the effects of deregulation in the airline industry. The main conclusions are: 1) airline safety has improved since deregulation; 2) requiring general aviation to follow safety rules similar to those already followed by commercial airlines could significantly improve safety; 3) increasing airport landing fees during congested periods would significantly reduce delays; 4) frequency of flights to small cities has risen since deregulation; and 5) deregulation has significantly lowered prices of commericial air travel and permitted more people to fly.