Assessment Of Market Power Research Articles

Market Power Assessment in Digital Markets: Conceptual Framework and Empirical Strategy

Market Power Assessment in Digital Markets: Conceptual Framework and Empirical Strategy

Research on the decision-making model of power purchase in electricity spot market oriented to market force suppression

Abstract In this study, for the electricity spot market under the market power suppression scenario, the market power suppression effect of contractual decomposed electricity is quantitatively evaluated by first reconstructing different electricity consumption loads using the combined MLR method and then combining the market power assessment model with the Lerner index. In addition, a contract for difference based on surveillance price is designed to inhibit market members from utilizing market power by adjusting the space of competitive electricity and the space of contracted electricity to avoid the market risk of rising electricity prices. Finally, a dynamic power purchase optimization decision model is constructed with CVaR as the risk metric and the profit of the power selling company and customer satisfaction as the objectives, and the MOSADE algorithm is used to solve the model and explore the optimal power purchase scheme. The analysis results show that the risk of the spot market can be avoided by bilateral contracts, option contracts, and unit power generation, and the price of electricity sales can be reduced. The expected returns of the four combinations are 21.37M$, 20.43M$, 19.24M$, 18.88M$, and 17.49M$ under the five risk coefficients, respectively. The CVaR values are −23.14, 2.84, 8.83, 10.75, 12.58. Higher than all the other cases, and their selling price for electricity is lower than all the different cases.

Measuring market power of rail incumbents

The aim of this article is to assess the market power of the state-owned incumbents within the open-access lines in Europe and compare it among themselves. This article investigates three open-access lines in Europe: Prague-Ostrava line (in the Czech Republic), Vienna-Salzburg line (in Austria) and Bratislava-Košice (in Slovakia). The market power assessment of each of the state-owned incumbents on these lines is based on their market shares, average revenues per passenger-kilometre, whether there is a vertical separation of the infrastructure owner and railway service provider and the role of state intervention. Our results show that the state-owned incumbent in the Czech Republic on the Prague-Ostrava line has the lowest market power in comparison to other investigated open-access lines.

The evolving concept of market power in the digital economy

Assessing market power is central to the CMA’s cases, including cases involving digital markets. Over the past few years, it has adapted its approach to deal effectively with digital markets and revised its guidance to reflect that approach. In dealing with digital cases, the CMA has not found that a new notion of market power was needed specifically for the digital space or for it to be able to capture its concerns in digital markets. However, it has revised its guidance to reflect how it conducts its assessment, including placing less emphasis on a formalistic market definition exercise and more emphasis on dynamic constraints, considering innovation as the current process of rivalry through investment decisions and incorporated the threat of entry when determining current competitive constraints. It has also considered characteristics like multi-sidedness, network effects and any resulting tipping dynamics in performing its assessments. The CMA’s current tools sometimes struggle to deal effectively with digital markets; therefore, the CMA’s Digital Markets Taskforce has recommended the introduction of a new ex ante regulatory regime to proactively shape the behaviour of particularly powerful digital firms and to prevent consumer harm from arising, including a new test to identify what firms should be subject to this new regime which includes, as an integral part, an assessment of market power.

German state competition policy: Responses to the challenges of digitalization of the economy, lessons for Russia

The article examines the experience of the German competition authority and the limits of the intervention of the German state and the competition policy developed by it in the digital economy. Particular attention is paid to the methodological approaches of the German regulator to assessing the dominant position of companies in digital markets, problems arising in their practical application, assessing the impact of the digital agenda on markets and competition. Current cases reflecting the multidimensional assessment of market power in digital markets are presented. The opinion of the German antimonopoly regulator is systematized, including the development of a set of measures aimed at reducing negative effects in the form of abuse of market power and the ability to have a negative impact on the market from online platforms. The basic rules of the regulatory doctrine adopted in 2021–2022 by the Economic Commission for Europe within the framework of the Digital Markets Act (DMA) are briefly presented. Particular attention is paid to the description of the concept of “intermediary power” as a special tool for assessing the market power of online platforms and the implementation of antimonopoly control and regulation of their behavior based on the regulatory concept of “gatekeeper”. The results of the research, based on new original ideas and meaningful content, can be integrated into the discourse of modern science as a vector conceptual approaches to the study of digital markets, as well as applied in the direct practice of antimonopoly regulation in the Russian Federation.

Review of Market Power Assessment and Mitigation in Reshaping of Power Systems

The deregulation of the power industry requires avoiding market power abuse to maintain the market competitiveness. To this end, a sequence of assessment measurements or mitigation mechanisms is required. Meanwhile, the increasing renewable energy resources (RESs) and flexible demand response resources (DRSs) are changing the behaviors of market participants and creating new cases of market power abuse. Such new circumstances bring the new evaluation and control methods of market power to the forefront. This paper provides a comprehensive review of market power in the reshaping of power systems due to the increasing RES and the development of DRS. The market power at the supply side, demand side, and in the multi-energy system is categorized and reviewed. In addition, the applications of market power supervision measures in the US, the Nordics, UK, and China are summarized. Furthermore, the unsolved issues, possible key technologies, and potential research topics on market power are discussed.

Epic Games v. Apple: A Case Summary

At the heart of the legal battle between Epic Games and Apple is a set of restrictions Apple imposes on app developers. For instance, Apple prohibits the distribution of iOS apps outside of the App Store, which Apple fully controls. Apple similarly requires developers to exclusively use its own in-app payment system for app purchases and in-app purchases for digital content. Through this system, Apple automatically collects a 30% commission on all such transactions. Dissatisfied with these policies, Epic Games tried to use its flagship game Fortnite as leverage to convince Apple to open up its closed platform. After Apple refused, Epic Games violated the App Store rules by enabling its own payment method in the Fortnite iOS app on August 13, 2020. That same day, Apple removed Fortnite from the App Store and Epic Games filed an antitrust suit in a federal district court in California. Apple soon thereafter countersued for breach of contract. A yearlong trial ensued, the result of which is a 185-page decision, which was handed down by Judge Yvonne Gonzalez Rogers on September 10, 2021. This summary condenses the Epic Games v. Apple decision into a six-page overview covering all the main parts of the decision. Part I of the summary covers the findings of fact, which includes the Court’s factual findings on the different product and geographic markets proposed by Epic Games and Apple, on the anticompetitive effects alleged by Epic Games, and on the business justifications put forward by Apple. Part II covers the application of the facts to the law and includes the Court’s legal market definition and market power assessment, its findings under federal antitrust law (Sections 1 and 2 of the Sherman Act) and state antitrust law (California’s Cartwright Act and Unfair Competition Law), and its breach of contract findings.

Market power assessment in electricity markets based on social network analysis

In a non-competitive electricity market environment, market players, especially generation companies (GenCos) try to act strategically and exercise market power. Therefore, it is essential for regulators to monitor the strategic behavior of market participants. This paper proposes a comprehensive approach for market power detection based on a centrality concept in social network analysis (SNA). The proposed centrality-based indices are employed to develop structural and behavioral market power measures. Moreover, these indices are compared with basic market power indicators (share, Residual Supplier Index (RSI), and Entropy) using the Spearman correlation index to evaluate their effectiveness.The proposed method is tested on IEEE 30 bus standard test system and the proposed indices are calculated for both supply-side and demand-side participants. The obtained results show that SNA can be used as an effective tool for monitoring the market power in future smart grids with plenty of players and complexity.

Assessment of market power on the route Prague – Ostrava

The aim of this article is to assess whether České dráhy enjoyed a dominant position between the years 2011 and 2019. The European Commission is currently investigating České dráhy for an alleged abuse of dominant position in the form of predatory prices between the year 2011 and 2019. In order to actually fine České dráhy for this conduct, the European Commission will have conclude that České dráhy actually enjoyed a dominant position. This article suggests that although the market shares of České dráhy indicate an existence of dominance, examination of further factors suggests that České dráhy were in fact not in a dominant position.

Big Data and Competition Policy in the European Union

Because of the specific features of digital markets and the emergence of new business models in the digital economy, competition often takes on a rather distinctive form, challenging competition authorities in the assessment of merger controls and anticompetitive behaviour. Several competition authorities have concluded recently that although generically formulated competition law provisions can be adapted to the particularities of a data-driven market, big data may require the use of somewhat specialized tools and methods in law enforcement, especially in the assessment of market power during merger control proceedings. One particular issue is whether data protection concerns might be covered by the scope of competition law. Recent case law suggests that national law enforcers are becoming increasingly flexible regarding privacy policies as a non-price competition factor in merger control in order to prevent future anti-competitive practices and a general reduction of competition in the relevant market.

Market power assessment through modelling of effective anti‐competitive behaviour of participants

Market power is an anti-competitive issue in the electricity markets, the identification and monitoring of which require using comprehensive and accurate indices. In this study, two new behavioural indices are introduced for the effective and accurate monitoring of market power. The suggested indices determine the actual level of market power in the transmission-constrained electricity markets by analysing the bidding behaviour of participants. The proposed indices necessarily consider the success of the participant's anti-competitive behaviour in a price increase on the basis for computation. First, the effective physical withholding index is presented, which can determine the amount of physical withholding that has led to the acceptance of a more expensive block. The effective financial distortion rate index is then proposed, which can specify the degree of financial deviation of the participants resulting from the successful exercise of each participant's withholding (financial–physical) strategy. Investigation of the results obtained from a three-bus test system and the IEEE 57-bus test system verifies the effective and accurate performance of the proposed indices in assessing the market power.

Market Power Assessment in Digital Markets – A German Perspective

Abstract Digitalisation is confronting competition law with a broad range of new challenges. Assessing the market power of businesses in digital markets has proven to be particularly difficult, and German competition law is in an on-going process of reform to address this and other related issues. This paper outlines the most important specific features of digital markets, explains how they affect the assessment of market power, and analyses the role of competition authorities and courts in decision-making.

Utility-scale energy storage in an imperfectly competitive power sector

Interest in sustainability has increased the share of variable renewable energy sources (VRES) in power generation. Energy storage systems' potential to mitigate intermittencies from non-dispatchable VRES has enhanced their appeal. However, the impacts of storage vary based on the owner and market conditions. We examine the policy implications of investments in utility-scale battery storage via a bi-level optimization model. The lower level depicts power system operations, modeled as either perfect competition or Cournot oligopoly to allow for the assessment of producer market power. The upper-level investor is either a welfare-maximizer or a profit-maximizing standalone merchant to reflect either welfare enhancement or arbitrage, respectively. We implement a realistic case study for Western Europe based on all possible size-location storage investment combinations. We find that market competition affects investment sizes, locations, and their profitability more than the investor's objectives. A welfare-maximizer under perfect competition invests the most in storage capacity. Consumers typically gain most from storage investments in all cases, exceeding the gains for the investors. Specifically, our results show that storage investments may either not occur or be located differently than at social optimum, if market power is exerted. Thus, policy makers need to anticipate producer market power when setting regulation.

Transaction Costs and Competition Policy

This paper studies how current competition policy should be altered in order to take into account our understanding of how transaction costs influence the ability of firms and consumers to deal with market power. Ever since Coase (1937) first established the importance of transaction costs to understand the theory of the firm, the study of transaction costs has been central to understanding several aspects of firm organization. Coase’s article (1960) on social costs underscored the importance of transaction costs in understanding why certain externalities exist. There has been a large literature exploring externalities and their relation to transaction costs in the field of public finance. There has been no corresponding literature in the field of competition policy despite the fact that a distortion of competition is an externality. The externality that competition authorities typically study is the one caused by the gap between price and marginal cost that arises from the existence of market power. Surprisingly, antitrust scholars have not spent as much time as warranted to think through how transaction costs should affect an assessment of market power and competition policy. This paper aims to fill that gap. The paper shows how current thinking about horizontal mergers, vertical mergers and vertical restrictions, Nash-in Nash bargaining models, two-sided markets, and control of data all need to be modified if one wants to avoid incorrect competition policy prescriptions.

Digital Economy, Big Data and Competition Law

Big data has a very important role in the digital economy, because firms have accurate tools to collect, store, analyse, treat, monetise and disseminate voluminous amounts of data. Companies have been improving their revenues with information about the behaviour, preferences, needs, expectations, desires and evaluations of their consumers. In this sense, data could be considered as a productive input. The article focuses on the current discussion regarding the possible use of competition law and policy to address privacy concerns related to big data companies. The most traditional and powerful tool to deal with privacy concerns is personal data protection law. Notwithstanding, the article examines whether competition law should play an important role in data-driven markets where privacy is a key factor. The article suggests a new approach to the following antitrust concepts in cases related to big data platforms: assessment of market power, merger notification thresholds, measurement of merger effects on consumer privacy, and investigation of abuse of dominant position. In this context, the article analyses decisions of competition agencies which reviewed mergers in big data-driven markets, such as Google/DoubleClick, Facebook/WhatsApp and Microsoft/LinkedIn. It also reviews investigations of alleged abuse of dominant position associated with big data, in particular the proceeding opened by the Bundeskartellamt against Facebook, in which the German antitrust authority prohibited the data processing policy imposed by Facebook on its users.

Digital Economy, Big Data and Competition Law

Big data has a very important role in the digital economy, because firms have accurate tools to collect, store, analyse, treat, monetise and disseminate voluminous amounts of data. Companies have been improving their revenues with information about the behaviour, preferences, needs, expectations, desires and evaluations of their consumers. In this sense, data could be considered as a productive input. The article focuses on the current discussion regarding the possible use of competition law and policy to address privacy concerns related to big data companies. The most traditional and powerful tool to deal with privacy concerns is personal data protection law. Notwithstanding, the article examines whether competition law should play an important role in data-driven markets where privacy is a key factor. The article suggests a new approach to the following antitrust concepts in cases related to big data platforms: assessment of market power, merger notification thresholds, measurement of merger effects on consumer privacy, and investigation of abuse of dominant position. In this context, the article analyses decisions of competition agencies which reviewed mergers in big data-driven markets, such as Google/DoubleClick, Facebook/ WhatsApp and Microsoft/LinkedIn. It also reviews investigations of alleged abuse of dominant position associated with big data, in particular the proceeding opened by the Bundeskartellamt against Facebook, in which the German antitrust authority prohibited the data processing policy imposed by Facebook on its users. The article concludes that it is important to harmonise the enforcement of competition, consumer and data protection polices in order to choose the proper way to protect the users of dominant platforms, maximising the benefits of the data-driven economy.

Nodal market power assessment of flexible demand resources

With the incorporation of higher shares of intermittent renewable energies (RES), more flexible resources are required in power systems to keep load balance. Under some extreme circumstances, the flexible demand resources (FDRs) may have the potential to dominate and obtain excess benefits, preventing other FDRs from participating in the electricity markets. Therefore, it is of great significance to identify the key FDR market power locations and implement some corresponding regulations. However, the relevant researches in power systems focused on the supply side, rather than the demand side. In this paper, a novel nodal market power analysis method is proposed to evaluate the potential influence of FDRs on electricity markets. Firstly, a multi-state model is established to present the multiple power system operation states including the random failures of system components. Then, the nodal market power assessment model is established under each specific state and new indices are proposed to evaluate the nodal market power of FDRs quantitatively. Furthermore, the key FDR nodes in demand side with stronger power in capturing excess revenue are identified. The 24-bus IEEE Reliability Test System is modified to demonstrate the feasibility of the proposed method. The numerical results of the proposed method are capable to display the existence of market power in demand side, and provide some valuable guidance for classification and operation of electricity markets.

Big Data and Competition Policy: Market Power, Personalised Pricing and Advertising

This paper studies three specific issues around the application of competition policy to big data. The first issue relates to market power assessment and analyses the power given by data control in the big data value chain. The second and third issues relate to abuse of dominance assessment and analyse the use of data to personalise prices and to target advertising. To deal with those three issues, we recommend an analytical and governance framework for competition agencies.

Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms

Market power on each side of a multisided platform, whether in the form of increasing prices or decreasing quality, is constrained by the risk of losing sales on the other sides. That tends to weaken market power on each side and encourages platforms to keep prices lower and quality higher than they would absent these feedback effects. In some cases the nature of the business model, and competition, result in the platform allowing one type of customers to participate in the platform for free or even to subsidize their participation. Non-price methods of attracting customers are especially important in this case, particularly when the business model adopted by the industry makes it difficult for platforms to move from free participation. To provide a reliable assessment of competitive constraints, market power analysis must consider the interdependencies in demand by the participants on the platform as well as have heightened focus on non-price competition when the participation for one group is free. Market shares should be used cautiously in assessing market power for multi-sided platforms, especially when they reflect only one side of the platform, and therefore do not account for the interdependent customer groups, or concern a free platform side where there is no monetary measure of value. Finally, dynamic competition makes the analysis of market power complex because it results in feature competition, and potentially drastic innovation, on one side of a platform that has feedback effects on the other side of the platform. The courts and authorities have recognized these points in Qihoo 360 v. Tencent, Cartes Bancaires v. European Commission, the Facebook/WhatsApp merger, and the Microsoft/Skype merger. These principals should become part of the standard analysis of multi-sided platforms by courts and competition authorities globally. These concerns are illustrated in the context of multi-sided platforms that offer online services where free services and dynamic competition are especially important.

Defining the Role of Competition in the Airport Industry: A Critical Assessment

Defining the relevant market is a preliminary step in every assessment of the degree of Significant Market Power (SMP). A firm with total market power can raise prices without losing any customers to competitors. SMP exists when prices exceed marginal cost and long run average cost , so the firm makes economic profits. The contribution of this paper is two-fold. On the one hand, a critical assessment of the role of competition in an industry/sector is performed. To this end, we discuss the most recent quantitative and qualitative techniques in market delineation. On the other hand, we try to shed some light on the competitive constraints in the Cypriot airport industry where little prior knowledge is evident. Although the airport industry is a crucial economic sector and has oligopolistic, to some extent even monopolistic structure, there is no standard and universal approach established by the National Competition Authorities (NCAs) for exact categorization of market delineation. I¤his paper tries to perform a thorough market power assessment in order to analyse all the competitive constraints faced by an airport operator, regardless of whether they arise from within or outside the relevant market(s).