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2. Stability of collusion and quality differentiation: a Nash bargaining approach
- Author:
- Thanos Athanasopoulos, Burak Dindaroglu, and Georgios Petropoulos
- Publication Date:
- 06-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- How do incentives to collude depend on how asymmetric firms are? For low levels of differentiation, an increase in quality difference makes collusion less stable. The opposite holds for high levels of differentiation.
- Topic:
- Political stability, Business, and Economic Growth
- Political Geography:
- Global Focus
3. Platform mergers and antitrust
- Author:
- Geoffrey Parker, Georgios Petropoulos, and Marshall Van Alstyne
- Publication Date:
- 06-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Platform ecosystems rely on economies of scale, data-driven economies of scope, high quality algorithmic systems, and strong network effects that frequently promote winner-takes-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Big platforms’ market dominance has generated competition concerns that are difficult to assess with current merger policy tools. We examine the acquisition strategies of the five major US firms—Google, Amazon, Facebook, Apple and Microsoft—since their inception. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns about acquisitions in big platform ecosystems we develop a four step proposal that incorporates: (1) a new ex-ante regulatory framework, (2) an update of the conditions under which the notification of mergers should be compulsory and the burden of proof should be reversed, (3) differential regulatory priorities in investigating horizontal versus vertical acquisitions, and (4) an update of competition enforcement tools to increase visibility into market data and trends.
- Topic:
- Markets, Digital Economy, Internet, Economy, and Innovation
- Political Geography:
- Global Focus and United States of America
4. Reducing mobility of SARS-CoV-2 variants to safeguard containment
- Author:
- Martin Hellwig, Viola Priesemann, and Guntram Wolff
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Escape variants can cause new waves of COVID-19 and put vaccination strategies at risk. To prevent or delay the global spread of these waves, virus mobility needs to be minimised through screening and testing strategies, which should also cover vaccinated people. The costs of these strategies are minimal compared to the costs to health, society and economy from another wave.
- Topic:
- Health, Governance, Global Political Economy, Vaccine, and COVID-19
- Political Geography:
- Global Focus
5. Research and innovation policies and productivity growth
- Author:
- Reinhilde De Veugelers
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- We review the evidence on the impact of public intervention on private research and innovation, and how research and innovation and R&I policies affect growth in the applied macro models most commonly used in European Union policy analysis. The evidence suggests that R&I grants and R&I tax credits can have positive effects in terms of stimulating investment in innovation. In terms of the impact of public R&I interventions on economy-wide GDP growth and jobs, the available applied macro models predict positive effects over the long term. It therefore takes time before short-term negative effects associated with reallocations of high-skilled labour from other productive activities to generate the extra innovations, and the negative effects from displacing older, more labour-intensive production processes, are compensated for. To the question of whether R&I policies can serve to power growth, the answer can only be a timid yes at this stage. R&I policies certainly have the potential, but still too little is known of what drives their actual effects. More micro and macro evaluations are still needed.
- Topic:
- Economy, Research, Innovation, and Strategic Competition
- Political Geography:
- Global Focus
6. Navigating through hydrogen
- Author:
- Ben McWilliams and Georg Zachmann
- Publication Date:
- 04-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Hydrogen is seen as a means to decarbonise sectors with greenhouse gas emissions that are hard to reduce, as a medium for energy storage, and as a fallback in case halted fossil-fuel imports lead to energy shortages. Hydrogen is likely to play at least some role in the European Union’s achievement by 2050 of a net-zero greenhouse gas emissions target. However, production of hydrogen in the EU is currently emissions intensive. Hydrogen supply could be decarbonised if produced via electrolysis based on electricity from renewable sources, or produced from natural gas with carbon, capture, and storage. The theoretical production potential of low-carbon hydrogen is virtually unlimited and production volumes will thus depend only on demand and supply cost. Estimates of final hydrogen demand in 2050 range from levels similar to today’s in a low-demand scenario, to ten times today’s level in a high-demand scenario. Hydrogen is used as either a chemical feedstock or an energy source. A base level of 2050 demand can be derived from looking at sectors that already consume hydrogen and others that are likely to adopt hydrogen. The use of hydrogen in many sectors has been demonstrated. Whether use will increase depends on the complex interplay between competing energy supplies, public policy, technological and systems innovation, and consumer preferences. Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions. Certain key principles can be followed without regret: driving down supply costs of low-carbon hydrogen production; accelerating initial deployment with public support to test the economic viability and enable learning; and continued strengthening of climate policies such as the EU emissions trading system to stimulate the growth of hydrogen-based solutions in the areas for which hydrogen is most suitable.
- Topic:
- Climate Change, Energy Policy, European Union, Carbon Emissions, Decarbonization, and Hydrogen
- Political Geography:
- Europe and Global Focus
7. Platform mergers and antitrust
- Author:
- Geoffrey Parker, Georgios Petropoulos, and Marshall Van Alstyne
- Publication Date:
- 01-2021
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Platform ecosystems rely on economies of scale, data-driven economies of scope, high-quality algorithmic systems and strong network effects that typically promote winner-take-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Market dominance by big platforms has led to competition concerns that are difficult to assess with current merger policy tools. In this paper, we examine the acquisition strategies since their inception of the five major US firms – Google, Amazon, Facebook, Apple and Microsoft. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns arising from acquisitions in big platform ecosystems this paper sets out a four-step proposal that incorporates: (1) a new ex-ante regulatory framework, (2) an updating of the conditions under which the notification of mergers should be compulsory and the burden of proof should be reversed, (3) differential regulatory priorities in investigating horizontal versus vertical acquisitions, and (4) an updating of competition enforcement tools to increase visibility of market data and trends.
- Topic:
- Markets, Regulation, Digital Economy, Economy, Business, and Innovation
- Political Geography:
- Global Focus