Russell Pittman

Rent-seeking and market structure: Comment

If the firms in an industry are to be successful in raising money to influence government, two conditions must be met: (1) there must be sufficient rents available from government decisions regarding that industry to make such expenditures worthwhile, and (2) the industry must be sufficiently concentrated to avoid a free-rider problem in fund-raising. This argument, though seemingly intuitively appealing, has been under recent empirical attack; this paper seeks to restore the parapets.

Consumer Surplus as the Appropriate Standard for Antitrust Enforcement

In this paper, I argue that such transfers are likely overall to be quite regressive, and thus that a consumer surplus standard rather than a total welfare standard may be appropriate for antitrust. Two common arguments against this standardA¢â‚¬â€ that most mergers are in markets for intermediate goods, and that a consumer welfare standard implies a tolerance for monopsonyA¢â‚¬â€ are examined and found wanting. I argue in addition that, even if a total welfare standard is used, both the finance literature on merger outcomes and the structure of the U.S. enforcement agencies suggest that the use of a consumer surplus standard by the agencies is more likely to achieve that goal.

Restructuring the Russian Electricity Sector: Re-Creating California?

The Russian Federation has begun the restructuring of its electricity sector, following the now standard restructuring model of complete vertical separation of generation from transmission, with the aim of creating competition in regional wholesale generation markets. This paper examines the structure of the six principal regional generation markets that are in their early stages of development and argues that they are likely to be characterized by high levels of market power on the part of individual privatized generation companies, especially during the peak winter demand season. These levels - considerably higher than those that caused competitive problems in California - seem to create a serious risk of price spikes in deregulated wholesale electricity markets, and thus of significant price increases to consumers of electricity.

Options for Restructuring the State-Owned Monopoly Railway

Vertical separation in the freight railways sector may sacrifice significant economies of integration. Economies of density suggest that corresponding benefits may be elusive. We examine competitive alternatives to vertical separation. One option is the creation of competition among restructured vertically integrated railways, an option generally limited to relatively large countries absent willingness to create multinational railway networks. Second is the opening of the infrastructure of the integrated railway to access by train operating companies. Rarely are the benefits of separation of train from track likely to be so great as to outweigh the losses from the vertical separation itself.

ELECTRICITY RESTRUCTURING IN CHINA: HOW COMPETITIVE WILL GENERATION MARKETS BE?

The continuation of Chinas remarkable economic growth will depend on continued increases in electricity supply. China has commenced a program of electricity sector restructuring, with the announced aim of relying on markets and competition to provide incentives for attracting private investment and encouraging efficiency. However, a close examination of the generation markets being created suggests that truly free wholesale prices are likely to be both high and volatile. This may be the reason that these prices have not yet been freed — and it may not bode well for true market liberalization in the future.

The divergence of SIC industries from antitrust markets: Indications from Justice Department merger cases

Abstract A comparison between the size of markets alleged in Justice Department merger cases and SIC industries indicates that SIC industries generally are far larger than antitrust markets.

Predatory investment U.S. vs. IBM

Abstract This paper examines the most likely example of anticompetitive behavior uncovered in the U.S. vs. IBM antitrust suit: the introduction by IBM of its 360/90 ‘super computer’ in response to the introduction of a similar machine by a competitor. The two leading competing hypotheses are examined — that IBM introduced its system as a weapon of predation, and that IBM expected the system to be profitable — and both are found wanting. The paper concludes that IBM almost certainly knew that the system would be unprofitable, but that the hypothesis of predation is less appealing than that of product-market signaling.

The Economics of Railroad 'Captive Shipper' Legislation

Recent rate increases by U.S. freight railroads have refocused attention on regulation, deregulation, and regulatory reforms in the railroad industry. Legislation introduced into Congress would render a variety of railroad behavior newly subject to the jurisdiction of the antitrust statutes, with potential enforcement by the Antitrust Division and the FTC and through lawsuits brought by state attorneys general or private parties. This paper considers the economic issues raised by legislation and the likely impacts on competition and welfare.

Electricity Restructuring in China: The Elusive Quest for Competition

The continuation of China’s remarkable economic growth will depend on continued increases in electricity supply. China has commenced a program of electricity sector restructuring, with the announced aim of relying on markets and competition to provide incentives for attracting private investment and encouraging efficiency. However, a close examination of the generation markets being created suggests that truly free wholesale prices are likely to be both high and volatile. This may be the reason that these prices have not yet been freed – and it may not bode well for true market liberalization in the future.

Abuse-of-Dominance Provisions of Central and Eastern European Competition Laws: Have Fears of Over-Enforcement Been Borne Out?

Fifteen years ago, when economic reformers were writing and enacting competition laws in the transition economies of Central and Eastern Europe, some critics warned that such laws, or too stringent enforcement of such laws, carried the danger of discouraging competitive behavior and the development of markets. An examination of the enforcement experience with the abuse-of-dominance provisions of the laws of eleven countries over two separate time periods suggests that the feared evils have not materialized. Two patterns stand out in this enforcement experience: first, the number of findings of abuse of dominance has been very small in countries other than Poland, and second, a large and growing proportion of these findings of abuse have been in sectors that would in developed market economies be subject to economic regulation.