Centre for Market and Public Organisation

1. Are more experienced experts tougher? Evidence from competition law.Ludivine Garside, Paul Grout & Anna Zalewska2 March 2006 Centre for Market and Public Organisation

2. Outline • Motivation • Data • Results Garside, Grout & Zalewska

3. Why might experience matter? • Experience – updating: Meisner & Kassin (L&HumBeh 2002) – Handberg & Tate (AmJPol Science 1991) • Judges life tenure (Supreme Court: Stras Minnesota LR 2006) • Public officials generally – economic decisions • Other factors (Ashenfelter et al JLS 1995; Ichino et al EER 2003) Garside, Grout & Zalewska

4. How might if work? • Heterogeneous priors/confirmatory bias/correlated tenure: Rabin & Schrag (QJE 1999) • Experience – updating • Career concerns Garside, Grout & Zalewska

5. Why Competition law • excellent framework for this purpose • lots of data to condition on and clear theory of how it should work • unique detailed data set Garside, Grout & Zalewska

6. UK I Abuse regime (as opposed to prohibition regime) – “restraints of trade in principle acceptable, unless they can be argued to be detrimental to the common good” 428 references to the Competition Commission (1970-2003) • 239 merger references • 113 market investigation references • 32 public sector references • 14 licence modifications • 11 anti-competitive references • 6 general references • 7 airport (quinquennial) • 3 monopoly & public sector • 1 broadcasting • 1 restrictive labour practices • 1 unclassified Garside, Grout & Zalewska

7. UK II • Preliminary investigation (Office of Fair Trading, OFT) • Reference to Competition Commission by OFT • Investigators appointed from amongst “Reporting” panel members • Investigation report submitted to Secretary of State • identification of the relevant market(s) • conclusions as to adverse effect on competition or detrimental effects on customers • recommendations as to possible remedies • Investigation report published Garside, Grout & Zalewska

8. UK III References made 1973 to Feb 2000: Fair Trading Act 1973 (c. 41) prior to 1973: Monopolies & Restrictive Practices (Inquiry & Control) Act 1948 & Restrictive Trade Practices Act 1956 & Monopolies & Mergers Act 1965 • by Director General of Fair Tradingor • by Secretary of State • by Secretary of State Garside, Grout & Zalewska

9. Data I Investigations: • referred to the Competition Commission (C.C.),formerly Monopolies & Mergers Commission (MMC) • for “possible abuse of a monopoly situation” • published between 1970 - 2003 Garside, Grout & Zalewska

10. Data II • Investigation level: • 431 company observations, • 85 cases • 122 company observations with profitability, (1970-1996) (1970-2003) Garside, Grout & Zalewska

11. Data III Garside, Grout & Zalewska

12. Data IV Garside, Grout & Zalewska

13. Data V Garside, Grout & Zalewska

14. Data VI Garside, Grout & Zalewska

15. Garside, Grout & Zalewska

16. Approach • Probit • Independent cases • Firm-level observations cannot be treated as independent • Use robust standard error estimates to account for intra-cluster correlation (at case level and at chairman level) Garside, Grout & Zalewska

17. Full company data set

19. Case data set

20. Predicted value = 0.662 Garside, Grout & Zalewska

21. Full data set

24. Clustered by chairman

26. Gender

27. Garside, Grout & Zalewska