Lay summary

This research project adds to the analysis and understanding of three key issues in modern industrial organization and regulation. Each of these key issues is analyzed in a separate sub-project:

1) Imperfect Competition in Vertically-Related Markets

In vertically-related industries, non-binding retail-price recommendations (RPRs) are ubiquitous. Surprisingly, the economics of RPRs are not very well understood. The object of this subproject is to (i) provide a theory of RPRs which does not presuppose that economic agents are either non-rational or harbor interests beyond their own material payoffs, and (ii) apply this theory to improve competition policy towards vertical restraints.

2) Restructuring Network Industries

The recent restructuring of network industries has brought about mixed results. A particular concern is the potential for degradation of infrastructure quality. The purpose of this subproject is to examine the conditions under which the restructuring of network industries provides opportunities for more competition without undermining investment incentives. In particular, the project examines the conditions under which regulation or the engagement of (state-owned) public firms may crowd out private investment into infrastructure quality.

3) Foundations of Competition Policy

The effectiveness of competition policy in a small open economy such as Switzerland crucially depends on the openness towards international trade. Yet, due to the lack of adequate micro data, there is little evidence on the causal effects of liberalizing international trade on individual firms and industries. This subproject views the enactment of the Bilateral Agreements I between Switzerland and the European Union in 2002 as a natural experiment to measure the impact of liberalizing trade on firms and industries. For this project, a unique data set on the universe of Swiss plants is provided by the Swiss Federal Statistical Office.