Dieter Schmidtchen

Strategic Power in the European Union

In this paper we propose a new method to evaluate the distribution of power between decision-making bodies in the European Union. Conventional methods that measure the voting power of players, such as the Banzhaf, Johnston, Holler and Shapley-Shubik indices, are insufficient for this purpose. They take no account, in an endogenous way, of the differences in the abilities of players to affect the outcome of decision-making, which are a result of the existence of political institutions. We propose a different way to measure decision-making power based on the distance between a players ideal point and the equilibrium outcome of a game. While all previous indices are based on cooperative game theory, the index developed in this paper is based on non-cooperative game theory, which has been the dominant thrust of theoretical politics and economics in the last years. The new index is applied to legislative procedures in the European Union.

Policymaking, Comitology and the Balance of power in the European Union

Using simple game theory, this paper analyzes the working properties of the different procedures laid down in the comitology decision, i.e., the European Councils decision on procedures for the exercise of implementing powers conferred on the Commission. Furthermore, it addresses the question of how the balance of power is determined by this decision.

Judicial detection skill and contractual compliance

Mutually beneficial agreements might fail if the parties fear contractual opportunism. Litigation is supposed to be a remedy, but gives scope for another kind of opportunistic behavior which we call litigational opportunism: Even knowing that the opponent has fulfilled his obligations, a party might bring suit. We introduce a new concept, called judicial detection skill, and show that positive judicial detection skill is a prerequisite if the court system is to deter opportunistic suits and simultaneously induce bilateral contractual compliance. The traditional literature on litigation either assumes judges with zero detection skill, or simply neglects that opportunistic suits might be successful. We prove that those models are unable to provide an answer to the question of how to prevent both types of opportunism simultaneously.

Time, uncertainty, and subjectivism: Giving more body to law and economics

Abstract I have said that those modern economists classified as institutionalists express considerable dissatisfaction with what most economists have been doing, but, by and large, this dissatisfaction is not with the basic economic theory itself but with how it is used. The objection essentially is that the theory floats in the air. It is as if one studied the circulation of the blood without having a body. -R. H. Coase (1984)

Eigennutz als Triebfeder des Wohlstands: Die "invisible hand" - im Hörsaal-Experiment sichtbar gemacht

Zusammenfassung Die empirische Prüfung theoretischer Forschungsergebnisse wirft in der Ökonomie - wie bei jeder Sozialwissenschaft - Probleme auf. Anders als in den Naturwissenschaften können volkswirtschaftliche Problemstellungen kaum in Labors nachgebildet werden. Seit einigen Jahren nutzen Ökonomen allerdings die Erfahrungen der Psychologie mit stilisierten Experimenten, um zumindest ihre grundlegenden Verhaltenshypothesen testen zu können. Dieser Beitrag stellt ein einfaches Hörsaal-Experiment vor, das Adam Smiths Hypothese von der “unsichtbaren Hand” im Marktgeschehen empirisch überprüft. Das Experiment zeigt zudem, wie Wettbewerb als Entdeckungsverfahren funktioniert, und es besitzt hohen didaktischen Wert: Die Studenten erhalten Einblick in empirische Forschung und erleben hautnah das Funktionieren des Marktes. Summary In economics, like in any social science, empirical tests of theoretical results face the problem that the economy cannot be reproduced in laboratories. Drawing on the experience of psychology, experimental economics nowadays uses stylised experiments to test at least the basic assumptions of the economic theory of human behavior. The article describes a simple classroom experiment that serves as an empirical test of Adam Smith’s invisible-hand hypothesis. It demonstrates that competition works as a discovery procedure. The experiment is of high didactical value, since the students gain insights into empirical research and experience how markets work.

Wettbewerb und Kooperation (Co-opetition): Neues Paradigma für Wettbewerbstheorie und Wettbewerbspolitik?

Auf den ersten Blick scheinen die Begriffe Wettbewerb (Konkurrenz) und Kooperation ein Gegensatzpaar zu sein. Zum Wesen (dynamischen) Wettbewerbs gehort Rivalitat: Kampf um grosere Marktanteile, Kampf um einen Auftrag, Kampf um den Zuschlag bei einer Ausschreibung. Die Interessen der Wettbewerber sind einander entgegengerichtet (konfliktar). Was der eine gewinnt, verliert der andere. In dieser Hinsicht entspricht Wettbewerb einem Nullsummenspiel einer Win-Lose-Beziehung.1

Transport, Welfare and Externalities

This book discusses a paradigm shift for dealing with the internalization of external costs in transport. Crucial to the analysis is the insight that the polluters are not the only cost drivers; both pollutees and the state can also contribute to reducing social costs. The authors show that applying the Cheapest Cost Avoider Principle (CCAP) instead of the Polluter Pays Principle (PPP) can lead to substantial welfare improvements.

On the Possibility of a Preference-Based Power Index: The Strategic Power Index Revisited

In this paper we discuss the strategic power index (SPI) as we have developed in earlier work. In contrast to traditional power indices, which deduce power from voting rules for a set of players, the SPI employs the analytical tools of non-cooperative game theory. Actor preferences, the policy space, decision-making rules, as well as the strategic considerations of the players in playing games, are integrated into the analysis. While traditional power indices calculate the probability of a voter being decisive in a committee, the SPI measures average (expected) success. In view of various objections made against the SPI, we show that this index expresses power in a meaningful way. We argue against the idea that SPI as preference-based index is impossible since it does not capture ‘a fixed core of meaning of power’. We challenge the view that the index confounds power and success, and even can become negative. Finally, we discuss the proposition that the SPI is a modified Banzhaf index, and show that this proposition is based on a too simple representation of a strategic game.

Fighting Cartels: Some Economics of Council Regulation (EC) 1/2003

This paper investigates the effectiveness of the new Council Regulation (EC) 1/2003 which replaces the mandatory notification and authorization system by a legal exception system. Effectiveness is operationalized via the two subcriteria compliance to Art. 81 EC Treaty and the probabilities of type I and type II errors committed by the European Commission. We identify four different types of Perfect Bayesian Nash Equilibria: fullcompliance, zero-compliance, positive-compliance and full-deterrence. We show that the Commission can, in principle, hit the full-compliance equilibrium, where the cartelizing firms fully obey the requirements of Art 81(3) EC Treaty and both error probabilities are zero.

Der „More Economic Approach“ in der Europäischen Wettbewerbspolitik — Ein Konzept mit Zukunft

Die europaische Wettbewerbspolitik beruht auf vier Pfeilern: Kontrolle restriktiver Vereinbarungen, Kontrolle des Missbrauchs marktbeherrschender Stellungen, Fusionskontrolle und die Kontrolle staatlicher Beihilfen.