Sue H. Mialon

Private v. public antitrust enforcement: A strategic analysis

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust violation and lawsuit. The model highlights the tradeoff that private firms are initially more likely than the government to be informed about antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. Assuming coupled private damages, if the court is sufficiently accurate, adding private enforcement to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Pure private enforcement is never strictly optimal. Public enforcement can achieve the social optimum with a fee for public lawsuit that induces efficient information revelation. Private enforcement can also achieve the social optimum with private damages that are efficiently multiplied and decoupled.

Does large price discrimination imply great market power

A simple model demonstrates that there is no theoretical connection between the extent of price discrimination and the extent of market power.

Price Discrimination and Market Power

If there is price discrimination, at least one of the prices is not equal to marginal cost. Therefore, if there is price discrimination, there must be market power. While this logic is sound, it has led many policymakers to believe that price discrimination and market power are positively correlated. We present a model where measured price discrimination can be low while market power is high, and price discrimination can be high while market power is low, thus demonstrating that there is no theoretical connection between the strength of price discrimination and that of market power. We then present new evidence that price discrimination is negatively correlated with market power in the U.S. airlines industry.

Torture in Counterterrorism: Agency Incentives and Slippery Slopes

We develop a counterterrorism model to analyze the effects of allowing a government agency to torture suspects when evidence of terrorist involvement is strong. We find that legalizing torture in strong-evidence cases has offsetting effects on agency incentives to counter terrorism by means other than torture. It lowers these incentives because the agency may come to rely on torture to avert attacks. However, it also increases these incentives because other efforts may increase the probability of having strong enough evidence to warrant the use of torture. Legalizing torture in strong-evidence cases is more likely to reduce non-torture efforts if these efforts are more effective at stopping attacks and less effective at turning up strong evidence when the suspect is guilty. If it reduces non-torture efforts, it can reduce security and is more likely to do so if the attack threat is higher. Moreover, if torture is used in strong-evidence cases even if torture is banned, legalizing torture in strong-evidence cases necessarily reduces security if it reduces non-torture efforts. Lastly, it can increase incentives to torture even in weak-evidence cases --- a slippery slope.

Sinful indulgences, soft substitutes, and self-control

For several harmful goods (e.g., junk food and cigarettes), less-harmful substitutes are available (e.g., light cigarettes and reduced-fat junk food). A simple individual-decision model is developed to analyse the effects of less-harmful substitutes on consumption and health outcomes.

Go Figure: The Strategy of Nonliteral Speech

We develop a model of figurative or indirect speech, which may convey a meaning that differs from its literal meaning. The model yields analytical conditions for speech to be figurative in equilibrium and delivers a number of comparative statics results. For instance, it predicts that the likelihood of figurative speech is greater if the benefit to the listener of correctly understanding the speaker is greater. We then apply the model to analyze particular forms of indirect speech, including terseness, irony, and veiled bribery. Interestingly, the model provides a novel argument for the effectiveness of laws that strictly punish attempted bribery. (JEL D83, K42, Z13)

Pricing access in network competition

We compare various access pricing rules in the two-way access model. We show that the Generalized Efficient Component Pricing Rule (TECPR) leads to a lower equilibrium price than does the Efficient Component Pricing Rule, (ECPR) marginal cost pricing, (MCP) and any non-negative fixed access charges.

Prejudice and Competitive Signaling

In signaling games, prejudice occurs if an employer pre-judges some applicants without information and dismisses their signals based on irrelevant characteristics like race. When signaling is inefficient, competition among applicants lowers their signaling incentives and the quality of signals significantly. Then, prejudice is chosen to reduce competition. Prejudice against a type is inherited through inherited low-income. While the prejudice is against a low-income group, it appears to be against a type, because type and income are highly correlated through inheritance. In order to reduce prejudice, we advocate policies that enhance the quality of signals and sever the link with inequality.

Violence against women, social learning, and deterrence

We develop a simple model of sexual and domestic violence. By assumption, the potential victims threat to report if she is victimized is not credible, which implies that the only sequential equilibrium involves violence. However, a realistic social learning process converges to a non-sequential equilibrium without violence from all nearby states if the expected punishment for offenders whose victims report to the police is sufficiently high. A policy to increase the sentences for sexual and domestic violence convictions could therefore substantially reduce such violence in the long run, even if it is powerless to make womens threats to report credible.

Regulation of Internet Access

We provide a new model of platform competition on the Internet to analyze the effect of Net Neutrality regulation on market outcomes. Consumers subscribe to two vertically related platforms, an Internet service provider (ISP) and a content network platform (CNP), to reach content providers (CPs). CPs interact with consumers via CNPs. Local ISPs provide an essential input: the Internet connection for consumers and the last-mile access for the CNPs. Access regulation that lowers the ISPs’ last-mile access charges may not increase consumer Internet prices, implying that the “seesaw principle” between consumer Internet prices and access charges may not hold in some cases. The effect on consumer Internet prices depends on how responsive CNPs’ advertising fees are to changes in the Internet prices and access charges. If CNPs’ fees are highly responsive to the changes, access regulation lowers both the fees from CPs and consumer Internet prices. On the other hand, if CNPs’ fees are not so responsive, access regulation induces higher consumer Internet prices. The overall welfare implication of access regulation depends on its impact on consumer demand for the Internet. If access regulation generates greater consumer demand for the Internet, it improves total welfare. However, if it reduces consumer demand substantially, CPs are also worse off, and welfare decreases.We analyze the welfare implication of regulating the price of last-mile access to consumers provided by local Internet service providers (ISPs). We consider a new two-sided market model that highlights the vertical relationship between two platforms, a local ISP and a large content provider called a Content Network Platform (CNP) that plays the role of platform in the content markets. The welfare implication of regulating the Internet access depends on which of the two platforms holds a dominant factor in creating consumer demand for the Internet. If the ISPs Internet subscription price is the dominant factor, regulation alleviates inefficiencies due to the ISPs market power and, thus, is likely to improve welfare.