Consumer Welfare Research Articles

Unfair competition law in Ghana: unravelling the scope, evolving jurisprudence, challenges and future directions

Abstract Despite its implications for businesses and consumer welfare, unfair competition law has received limited scholarly attention in Ghana. This article fills a significant research gap by examining Ghana’s legal framework for unfair competition, focusing on legislative measures and court decisions in an attempt to facilitate comprehensive academic inquiry into the subject. The article explores how Ghana addresses unfair competition in line with international standards, particularly Article 10bis of the Paris Convention and the Trade-Related Aspects of Intellectual Property Rights Agreement. It assesses how Ghanaian courts have developed unfair competition protection jurisprudence over time with co-existing statutory and common law regimes. Additionally, it highlights the challenges in applying the law and areas for improving it. The study demonstrates how Ghana adopts various approaches to unfair competition, comprising a single source statutory reference point which coexists with the common law tort of passing off. The statutory approach, alone or with the other approaches, meets Ghana’s international obligations. However, there is a need for coherence and effectiveness in the interaction between statutory law and common law principles. Understanding this interaction is essential for ensuring Ghana’s consistent and effective application of unfair competition laws.

Structure, Conduct, Performance (SCP) Approach & Fairness Principle in Business Competition Law in The Era of Digital Platforms

The emergence of digital platforms has led to disruptions that affect not only technological and economic aspects, but also legal aspects, particularly business competition law. The discourse surrounding the development of digital platforms within the context of business competition has been influenced by two major schools of thought: the Chicago School, which adopts an effeiciency approach (also known as the consumer welfare approach) , and the Harvard School, which employs the structure, conduct, and performance (SCP) approach. This article aims to scrutinize the shortcomings of the efficiency approach advocated by the Chicago School in addressing the issues related to business competition in the digital platform market. Additionally, it seeks to demonstrate how the principle of fairness, based on the competitive process approach and market strcture, can serve as a more comprehensive analytical tool for evaluating the health of competition in the market. The results show that the efficiency approach is inadequate in addressing concerns of fairness in the digital market. Responding to the context, global business competition authorities have begun to promote a fairness approach to bolster SCP approach which serves as a moral underpinning for upholding the principles of healthy business competition in the digital platform era. This article applied normative legal research methods with a conceptual approach for analysis.

EXPRESS: The Impact of Air Pollution on Consumer Spending

Air pollution is a growing concern to economies and societies worldwide. Despite common knowledge that air pollution impairs our emotions and cognition and hence behavioral outcomes, the impact of air pollution on consumer spending remains an open question. Analyzing air quality readings and individual-level credit card transactions in South Korea, this paper shows that consumers spend more money when air quality is poorer. This correlation is more prominent in hedonic categories, such as entertainment or leisure activities, where the nature of consumption is characterized by greater emotional benefits. The authors consider potential explanations, and the leading hypothesis is that consumers treat spending as a mood-regulating resource. The results survive an array of robustness checks and are supported in a controlled experiment, reinforcing a causal inference behind the main findings. The authors provide implications for stakeholders to develop a sustainable marketing program that not only pursues managerial interests but also concerns consumer welfare in the face of environmental change.

UNDERSTANDING THE LACK OF TRANSPARENCY IN INSURANCE CONSUMER PROTECTION

This research paper delves into the intricacies surrounding consumer protection in the Indian insurance sector, focusing on the interplay between regulatory frameworks, legal provisions, and industry practices. Through a comprehensive analysis, the paper explores the Consumer Protection Act 2019, the Rights of Consumers under this Act, the Protection of Policyholders' Interest Regulations 2017, the recent judicial verdicts shaping consumer rights, and the overarching Insurance Act 1938. By examining key provisions, regulatory mechanisms, and case law, the paper aims to elucidate the challenges, implications, and potential remedies pertaining to transparency and accountability in insurance consumer protection. Through this exploration, the paper seeks to provide valuable insights for policymakers, regulators, insurers, and consumers alike, contributing to the ongoing discourse on enhancing consumer welfare and market integrity in the Indian insurance landscape. Keywords: Consumer Protection, Insurance Sector, Regulatory Framework, Transparency,

The influence of regulation on preference for utility infrastructure investment to generate income for Australian water corporations

ABSTRACT Effects of price regulation and preference for utility supply infrastructure on Australian urban water utilities and urban water markets are examinated using historical data, models of the future and a case study of Greater Sydney. Australian regulators utilise the building block method based on operating and capital costs, and a Regulatory Asset Base to set nominal revenue requirements and ultimately prices for water utility services. Regulation of water utilities that is dependent on a Regulatory Asset Base drives preference for utility infrastructure and is remote from market mechanisms of consumer demands for water and sewage services. These regulatory processes are not linked to the operation of the urban water market of government owned utility and distributed solutions, and act to crowd out viable complementary solutions including water efficiency, distributed water sources and alternative pricing models. Government regulation, ownership and operation of utilities may produce strong performance from the perspective of urban water corporations but decrease economic efficiency, resilience and social welfare in urban water markets. The role of major water corporations needs to be redefined in a market recognising multiple complementary water sources and services. Regulation of utility services should have regard to the entire market, market demand, environmental health and consumer welfare.

Willingness-to-pay for low-carbon residential heating systems: A discrete choice experiment among Dutch households

Most studies on decarbonizing space and water heating focus on the potential of low-carbon heating technologies from a top-down perspective, while there has been limited research on consumer preferences for low-carbon heat. To address this gap, we conduct a discrete-choice experiment among 1797 individuals in the Netherlands to estimate the willingness-to-pay (WTP) for residential-heating systems. Our results from the latent-class logit (LCL) model indicate that, on average, Dutch households are willing to pay a premium on their current monthly energy bill of 33% for electricity and 29.4% for hydrogen relative to using gas for heat production, 15.3% for reducing the amount of CO2 emissions per kWh of heat with 100 g and 16% for having the option to switch between energy retailers. In contrast, they require a discount of 28.4% for district-heating systems relative to standalone home appliances. Additionally, the class-profiling analysis indicates that individuals with higher education and income levels in the Northern Netherlands have the highest WTP for low-carbon electricity and hydrogen. These findings suggest that policymakers should favor decentralized heating solutions over district-heating systems to facilitate an energy transition in the residential sector. If district-heating systems are implemented, combining them with electricity or hydrogen instead of natural gas is recommended to realize higher consumer welfare.

First-party selling and self-preferencing

In this paper, I analyze the welfare effect of a vertically integrated gatekeeper platform selling its own first-party product, i.e., first-party selling, as well as the platform's incentive to favor the first-party product in the product recommendations it makes, i.e., self-preferencing. I find that, irrespective of self-preferencing, both consumer welfare and platform revenue are higher under first-party selling because first-party selling mitigates double marginalization. Additionally, third-party product prices are lower in expected terms under first-party selling, either because the platform reduces the commission fee (with self-preferencing) or downstream competition is fiercer (without self-preferencing). Finally, I show that both consumers and the platform are better off if the platform commits not to engage in self-preferencing.

PENERAPAN PENDEKATAN RULE OF REASON OLEH KPPU DALAM PENYALAHGUNAAN POSISI DOMINAN

This research aims to analyze the application of the rule of reason approach in the abuse of a dominant position and the authority of the KPPU in applying the rule of reason in the abuse of a dominant position. The method used is normative juridical research. The results of this research show that the KPPU in assessing Article 25 of Law No. 5 of 1999 alternatively uses one of the two per se illegal or rule of reason approaches with the aim of efficiency, innovation and consumer welfare

Testing the algebraic modeling of competitive impacts from wage premium shocks: a case study from a booming airline market

Labor relations issues such as collective bargaining and strike threat power have recently gained increased attention in the Brazilian air transportation market due to a short-term shortage of qualified workforce, leading stronger pilot unions to demand higher wages and better working conditions. Exacerbated by the notable expansion of the Brazilian economy between 2020 and 2023, where air travel demand surged by 60%, this pressure has driven labor costs to grow more rapidly than other cost categories. This paper examines exogenous flight crew cost shocks, treating these as increases in wage premiums resulting from stronger unionization and higher labor market rents. Using a differentiated duopoly model, we analyze the impact of these wage increases on competition between a major network carrier and a small low-fare carrier, introducing the hypothesis of non-exhausted economies of density. Our findings indicate that smaller airlines are more adversely affected by labor cost shocks, though differentiated wage increase schemes can mitigate these impacts, reducing market concentration and preserving consumer welfare. This study contributes to the literature by incorporating wage premium shocks into existing models and suggesting that labor regulations in Brazil should be liberalized to address the rapid growth in air transportation demand and the resultant workforce shortage.

Incentive Regulation: Expectations, Surprises, and the Road Forward

Forty years have passed since an inflation-adjusted price cap, widely called RPI-X, was proposed as a way of controlling prices in the UK’s newly privatised monopoly telecommunications company by a form of incentive regulation. The paper traces developments since then in several jurisdictions, within the context of a wider field of changing regulatory governance involving legislatures and governments as well as regulatory agencies. The focus is on, first, the experience of increasing complexity of the incentive schemes adopted, and second on the growing political salience of regulatory decisions which adds goals such as net zero, with more direct quantitative targets, to maximising consumer welfare. The implications of these changes for regulatory interventions are considered.

Foreign Direct Investment and Technology Licensing in a Polluting Industry

We consider a firm’s incentive for foreign direct investment (FDI) and international technology licensing in a polluting industry. We explain the rationale and the welfare implications of complementarity between FDI and licensing, i.e., the firm’s strategy of “FDI and licensing” (FL), which is empirically relevant but ignored in the literature. When the environmental tax cannot be committed, the firm adopts the licensing strategy if the pollution intensity is not high, and the licensing strategy may create lower consumer surplus and welfare compared to both FDI and FL. However, if the pollution intensity is high, the firm undertakes FL, which provide higher consumer surplus and welfare compared to both licensing and FDI. When the government can commit to the environmental tax, the firm always prefers FL. The host-country welfare is higher but the consumer surplus and world welfare may be lower under the committed tax policy compared to the non-committed tax policy. These results hold under Cournot competition and Stackelberg competition. We further show that FL can be the equilibrium strategy of the foreign firm if there is fixed-fee licensing instead of a two-part tariff licensing, which is considered in the main analysis.

Retail assortment under demand shocks: Evidence from the US yogurt market

AbstractDespite extensive research on retailers' price responses to demand shocks, much less is known about their non‐price responses. Using heterogeneity in timing, location, and magnitude of income and wealth shocks associated with the 2008 Great Recession, we explore how US retail stores adjusted product offerings under local demand shocks. We find that stores offer fewer products and varieties besides lowering prices. Using a structural demand model, we quantify the net welfare impact of the price and assortment adjustments. On average, the consumer welfare losses from variety reduction more than offset the welfare gains from price reductions.

Hybrid platforms with free entry: demand-enhancing activities

AbstractWe study the decision of a platform as to the quantity and quality of the products to sell directly on its own marketplace, where also third-party sellers decide how much to invest in the quality of their products. Using a representative agent framework that is based on a quasi-linear quality-augmented indirect utility function, we show that, under free entry, the quality investments of sellers do not change with platform entry, while the number of joining sellers does. Moreover, contrarily to what is found in the received literature, the platform may go hybrid even in the case it does not enjoy a competitive advantage vis-á-vis third-party sellers. We then study the welfare implications of a platform’s entry decision and show that promoting sellers’ investments and/or contrasting platform entry may lead to a larger as well as a lower consumer welfare. This depends on the platform’s response in equilibrium, both in terms of changes of its quality-enhancing investments and the fee charged on the revenues of third-party sellers.

‘Most Favored Nation’ Clauses in the Online Food Delivery Platform Market: Beyond Booking.com Cases

The COVID-19 pandemic catalyzed a transformative shift in the European food service industry, with local restaurants increasingly turning to online food delivery platforms (OFDPs) to sustain their operations during lockdowns. However, this symbiotic relationship has raised concerns regarding the prevalence of Most Favoured Nation clauses (MFNs) within contractual agreements between local restaurants and OFDPs These clauses, designed to ensure price parity across different sales channels, have sparked debates over their impact on competition and consumer welfare. This is due to their potential effect of hindering local restaurants’ ability to compete effectively, thus, consumers may face reduced price options and higher food costs. The Bundeskartellamt’s landmark decisions regarding MFNs in the online accommodation sector concerning Booking.com have provided initial guidance, but the application of this approach to OFDP markets remains complex. Against this backdrop, and following the reasoning laid down in a more recent approach from the Bundeskartellamt, we propose a systematic methodology for evaluating the effects of MFNs, taking as a starting point of analysis OFDP market conditions and business models. Ultimately, we aim to address the balance between positive and negative effects of usingMFNs byOFDPs to incentivize platform investment and protect the efficiencies passed on to consumers and local restaurants.

Blockchain adoption of pharmaceutical firms in a competitive market: Pricing, drug traceability and consumer awareness

To cope with counterfeit drugs reaching consumers all over the world, pharmaceutical firms increasingly regard blockchain technology (BCT) as a promising solution to achieve drug traceability. This study proposes a game-theoretic model to investigate the impact of BCT adoption on pharmaceutical firms’ pricing and performance in a competitive market, where one firm offers a branded drug and the other offers a generic version. We consider three contrastive cases with no BCT adoption, unilateral BCT adoption of the branded drug firm and bilateral BCT adoption and characterize consumer traceability awareness, which represents the fraction of consumers sensitive to drug traceability. We find that when BCT is unilaterally adopted, a high consumer traceability awareness level may lead to either higher or lower drug prices. The bilateral adoption of BCT always benefits the generic drug firm due to the enhanced drug traceability, but may damage the branded drug firm attributed to the mitigated differentiation between the two drugs. Compared with the unilateral adoption of BCT, bilaterally adopting BCT can lead to a win-win or lose-lose outcome, depending on the trade-off of drug traceability, drug differentiation and pricing competition. In addition, the adoption of BCT improves consumer welfare when consumers hold a high level of traceability awareness.

Competitive Bidding in Drug Procurement: Evidence from China

We study the equilibrium effects of introducing competitive bidding in drug procurement. In 2019, China introduced a competitive bidding program where drug companies bid for a prespecified procurement quantity in nine provinces. Using a difference-in-differences design, we show the program reduced average drug prices by 47.4 percent. Generic drugs won most bids and cut prices by 75.0 percent. We develop an equilibrium model to quantify the trade-off between lower prices and potential choice distortions. Competitive bidding increases consumer welfare if policymakers believe consumers should value branded and bioequivalent generic drugs equally. The program also reduced government expenditure on insurance by 19.8 percent. (JEL D44, G22, I18, L13, L65, P25, P31)

Data ownership, privacy concerns, and consumer welfare

We model the relationship between privacy concerns and consumer welfare in data provision under three types of data ownership. Data firms and intermediaries collect and process the data provided by consumers. Consequently, consumer welfare is influenced by the manner in which data are collected and processed. Our findings reveal that a compromised ‘partial data ownership’ regime, wherein consumers retain fundamental personal data rights and keep moderate data privacy concerns, is more favourable for optimising consumer welfare. This suggests that both full data ownership (i.e. consumer data utilisation is hindered by technical barriers and consumers have the control over data) and minimal data ownership (i.e. data are controlled by monopolistic data intermediaries) can result in a decline in consumer welfare, thus restricting the long-term growth of the data economy.

Consumer heterogeneity and inefficiency in oligopoly markets

Motivated by several recent studies on oligopolistic markets with consumer heterogeneity, we characterize the geometric properties of a class of inequalities involving the product of two integrals of the probability density quantile function and its reciprocal. Through three applications, we illustrate how our characterization can help enrich our understanding of the existing findings and shed some new insights, regarding the extent to which consumer welfare and social efficiency depend on the properties of the distributions of consumer valuation heterogeneity.

Zero‐price effect and consumer welfare: Evidence from online classified real estate service

AbstractWe test whether the tendency to overvalue a free service over a paid alternative may lead to inferior economic outcomes. We examine data from an online classified real estate service in Israel that allows private and commercial owners to offer their real estate properties for sale and lease under either free‐basic or paid‐premium listing categories. Estimation results indicate a zero‐price effect in owners’ choice of a listing category. Moreover, although the vast majority of owners opt for the free‐ad category, the paid‐premium category generates increased buyer demand, greater transaction price, and decreased time‐on‐market—adding up to an average net benefit of about 3.5%–3.8% of the average transaction price (equivalent to about $12K–$13K). Outcomes are robust to a series of identification and test‐design issues.

Overlooking digital collusion risks in the EU's agenda for a single European data space(s)

ABSTRACT The EU aims to drive the data and platform economy by establishing a single European Data Space(s) vision, envisioning it as a catalyst for innovation, novel services, enhanced competition and consumer welfare. It involves implementing existing and forthcoming horizontal and sectorial data-sharing laws to overcome technical, legal, and ethical barriers to (personal and non-personal) data access and achieve specific data-driven policy targets. The initial spaces will cover nine economic sectors, few established and others in development. The study assesses the possible oversight of competition law collusion concerns in these initiatives, using the example of the EU Mobility Data Space (EMDS). By employing competition law qualitative doctrinal methods, it emphasizes the risks of digital collusion within these EU-wide open data frameworks, and it indicates that they could severely harm one or several parameters of competition. It concludes by offering policy recommendations to prevent or minimize collusion risks for the EMDS and suggests further research in other sectors.