David Spector

Competition and the capital-labor conflict

This paper analyzes the macroeconomic effects of changes in the intensity of product market competition. The focus is on the interaction between imperfect competition in product markets and bargaining in the labor market. The main result is that, while a uniform intensification of product market competition increases employment, it may cause real wages to fall, in the short run as well as in the long run. This is especially likely if labor market regulations are favorable to workers. Therefore, product market and labor market regulations tend to reinforce each other politically, and compensatory fiscal transfers may be needed in order to enact employment-enhancing deregulation policies.

Horizontal Mergers, Entry and Efficiency Defences

This paper addresses the effect of horizontal mergers on prices. It is shown that if firms compete in quantities and marginal costs are nondecreasing, any profitable merger failing to generate technological synergies must harm consumers through higher prices, irrespective of entry conditions in the industry. However this result does not hold if products are differentiated and firms compete in prices. The implications for merger policy are discussed.

Rational Debate And One-Dimensional Conflict

This paper studies repeated communication regarding a multidimensional collective decision in a large population. When preferences coincide but beliefs about the consequences of the various decisions diverge, it is shown, under some specific assumptions, that public communication causes the disagreement between beliefs either to vanish or to become one-dimensional at the limit. Multidimensional disagreement indeed allows for many directions of communication, including some that are orthogonal to the conflict, along which agents can communicate credibly. The possible convergence toward a one-dimensional conflict where no further communication takes place may be related to the empirically observed geometry ofthe political conflict in many countries.

Is it Possible to Redistribute the Gains from Trade Using Income Taxation

How does international trade affect income redistribution? We consider a country where the government uses a nonlinear income tax to maximize some redistributive social welfare function, subject to the constraint that it can observe only individual income but not individual characteristics. In autarky, the government is able to partially equalize equilibrium prices and wages by manipulating quantities through the tax system. If borders are open, prices and wages are determined by world markets and the government is deprived of this possibility. This implies that it may be unable to redistribute the gains from trade: opening borders may decrease welfare even after the optimal policy adjustment.

Pure communication between agents with close preferences

Abstract This paper studies cheap-talk games when the speaker’s and the receiver’s preferences are close. It is shown that, as they tend to coincide, the most informative equilibrium converges toward full information transmission.

The Noisy Duopolist

This paper provides an explanation for noisy pricing based on the strategic interaction of two firms competing in prices. When a firm adds noise to its prices, undercutting it becomes harder. Therefore, noisy pricing allows a firm to either exclude a competitor while charging supracompetitive prices, or to soften competition and have both firms earn supracompetitive profits. Such behavior leads to prices lying between competitive and monopolistic levels, and harms consumers and social welfare. It occurs in equilibrium if firms set prices sequentially, and in some equilibria of a repeated game of simultaneous price-setting if one firm is patient.

Failure of communication despite close preferences

Abstract This paper analyzes a particular class of cheap-talk games. It is shown that communication may fail even when their preferences are very close.

From Harm to Competitors to Harm to Competition: One More Effort, Please!

The rules proposed in the Commissions recently issued discussion paper on Article 82 are not always consistent with the purported objective of protecting competition rather than competitors. Unlike those for predatory pricing, bundling and tying, the proposed rule for single-branding and rebates implicitly relies on the assumption that harm to competitors implies harm to competition. But this should be checked rather than postulated. The causal link between harm to competitors and harm to competition chiefly depends on whether the dominant firms competitors, facing a decrease in demand, are likely to react by cutting prices or by cutting investment. A proper assessment method should thus include an examination of the cost structure of the allegedly excluded firms, considering a possibly broader market than the relevant antitrust market. This would in some cases permit the quick dismissal of complaints without merits and thereby simplify enforcement.

Fédéralisme et conflit distributif

This paper studies the conflict over income redistribution in a federation. If federal redistribution replaces national redistribution, then forming a federation leads to an increase in redistribution if a federal vote is held, but to a decrease if intergovernmental bargaining determines taxes. Also, the existence of federal taxation next to national taxation allows to separate international conflict from internal conflicts, and thus facilitates the expropriation of the minority nation.