Conditional Pricing Practices – A Short Primer
Patrick DeGraba, Patrick Greenlee, Daniel P. O’Brien, September 2017
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.
Economic Analysis of Hotel Resort Fees
Mary W. Sullivan, January 2017
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, February 2009
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, February 2005
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, December 2002
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.
Economic Perspectives on the Internet
Alan E. Wiseman, July 2000
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.
The Costs and Benefits of Occupational Regulation
Carolyn Cox and Susan Foster, October 1990
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.