Sven Heim

Deregulation, Competition, and Consolidation: The Case of the German Interurban Bus Industry

We provide an empirical assessment of the German interurban bus industry two years after its deregulation in January 2013. In addition to a general description of key developments of the industry, we use a unique route-level price data set to study both competitive interaction in general and the potential price effects of a recently announced merger of the two largest players in the market in particular. We find that route-level average prices, inter alia, do not only depend on the number of competitors but especially on the composition of firms operating on a particular route. Although our empirical results suggest short-term price increases on certain route types post-merger, it remains an open question whether the merger should be classified as anticompetitive.

Do Pay-as-Bid Auctions Favor Collusion? Evidence from Germany's Market for Reserve Power

We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them.

Strategic Capacity Withholding Through Failures in the German-Austrian Electricity Market

In electricity day-ahead markets organized as uniform price auction, a small reduction in supply in times of high demand can cause substantial increases in price. We use a unique data set of failures of generation capacity in the German-Austrian electricity market to investigate the relationship between electricity spot prices and generation failures. Differentiating between strategic and non-strategic failures, we find a positive impact of prices on non-usable marginal generation capacity for strategic failures only. Our empirical analysis therefore provides evidence for the existence of strategic capacity withholding through failures suggesting further monitoring efforts by public authorities to effectively reduce the likelihood of such abuses of a dominant position.

Non-sequential search, competition and price dispersion in retail electricity

We investigate the impact of consumer search and competition on pricing strategies in Germany’s electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer search. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-Gonzalez (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants.

Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs

There is a growing concern that minority shareholding (MS) in rival firms may facilitate collusion. To examine this concern, we exploit the fact that leniency programs (LPs) are generally recognized as a shock that destabilizes collusive agreements and study the effect that the introduction of an LP has on horizontal MS acquisitions. Using data from 63 countries over the period 1990-2013, we find a large increase in horizontal MS acquisitions in the year in which an LP is introduced, especially in large rivals. The effect is present however only in countries with an effective antitrust enforcement and low levels of corruption and only when the acquisitions involve stakes of 10%-20%. These results suggest that MS acquisitions may stabilize collusive nagreements that were destabilized by the introduction of the LP.

The Duration of the EC Merger Control Process: Determinants and the Impact of the 2004 Merger Regulation Reform

The duration of merger proceedings held by competition authorities is an important determinant of the efficiency of the entire merger control process. A data set of 2953 Phase I and 92 Phase II investigations completed by the European Commission (EC) between 1999 and 2008 is used to examine the key determinants of their duration. Differentiating between authority- and case-related drivers, the findings show that while the duration of Phase I investigations largely depends on the type of decision and use of simplified procedure, the duration of Phase II investigations is driven by factors such as industry knowledge, the duration of the preceding Phase I investigation, the origin of the notifying firm, or the number of identified relevant markets. Evidence is also provided that the significant increase in average duration identified after the 2004 merger regulation reform does not imply a decrease in administrative efficiency, as the probability of in-depth investigations was correspondingly reduced.