
Tommaso M. VallettiImperial College London | Imperial · Imperial College Business School
Tommaso M. Valletti
PhD
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234
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Publications
Publications (234)
We discuss the design of an effective merger review policy for the twenty-first century. We argue that the practice of the past decades is inadequate and propose a move towards much stronger rebuttable structural presumptions. These presumptions establish that all mergers above certain thresholds are illegal unless the merging parties can prove tha...
Centralization of public procurement can lower prices for the government’s direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally procured goods. We exploit the introduction of a central p...
We examine the effect of Internet diffusion on the uptake of an important public health intervention: the measles, mumps and rubella (MMR) vaccine. We study England between 2000 and 2011 when Internet diffusion spread rapidly and there was a high profile medical article (falsely) linking the MMR vaccine to autism. OLS estimates suggest Internet dif...
The authors investigate the impact of online news content on the effectiveness of display advertising. In a randomized online experiment, participants read news articles randomly paired with brand advertisements. Leveraging non-intrusive eye-tracking technology, the authors measure individual attention to both articles and ads. The authors then mea...
The paper provides new evidence on proxy indicators of market power for major European countries. The data show moderately increasing average industry concentration over the last two decades, a considerably increasing proportion of high-concentration industries, and an overall tendency toward oligopolistic structure. Estimates of aggregate profitab...
Centralization of public procurement can lower prices for the government’s direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally-procured goods. We exploit the introduction of a central p...
Three types of digital platforms are expanding in financial services: (i) fintech entrants; (ii) big tech firms; and (iii) increasingly, incumbent financial institutions with platform-based business models. These platforms can dramatically lower costs and thereby aid financial inclusion—but these same features can give rise to digital monopolies an...
We model digital platforms as attention brokers that have proprietary information about their users’ product preferences and sell targeted ad space to retail product industries. Retail producers—incumbents or entrants—compete for access to this attention bottleneck. We discuss when increased concentration among attention brokers results in a tighte...
Entrenched dominant firms and anticompetitive consummated mergers pose growing problems for antitrust agencies throughout the world. A lot of thought is being given as to how to address these situations but perhaps the most obvious idea—breaking up such firms—is generally dismissed as impractical, the equivalent of trying to unscramble eggs. We dis...
We study the link between lobbying and industrial concentration. Using data for the past 20 years in the US, we show how lobbying increases when an industry becomes more concentrated, using mergers as shocks to concentration. This holds true both for expenditures on federal lobbying as well as expenditures on campaign contributions. Results are in...
We study the effect of internet diffusion on childbirth procedures performed in England between 2000 and 2011. We show that broadband internet access increased Cesareansections: mothers living in areas with better internet access are 2.5 percent more likely to obtain a C-section. The effect is driven by first-time mothers who are 6 percent more lik...
When releasing a new version of a durable product, a firm aims to attract new customers as well as persuade its existing customer base to upgrade. This is commonly achieved through a rollover strategy, which comprises the price of the new product as well as the decision to discontinue the sale of the existing product (solo rollover) or to sell the...
On the occasion of the 10th anniversary of the 2010 U.S. Horizontal Merger Guidelines, this article provides an overview of the state of economic analysis of unilateral effects in mergers with differentiated products. Drawing on our experience with merger enforcement in Europe, we discuss both static and dynamic competition, with a special emphasis...
This paper analyzes the trade-offs associated with the deployment of contact tracing applications to support policy responses in a pandemic. In many jurisdictions, the government cannot force individuals to adopt such applications. We therefore analyze a simple model that highlights the importance of individuals’ incentives to voluntarily adopt a r...
This paper focuses on the assessment of mergers and in particular on unilateral effects analysis where innovation plays an important role. The paper discusses the economic theories behind innovation, how we move from the traditional product-by-product market definition to pipeline competition and innovation competition and the concept of innovation...
This paper studies the incentives to engage in exclusionary pricing in the context of two-sided markets. Platforms are horizontally differentiated, and seek to attract users of two groups who single-home and enjoy indirect network externalities from the size of the opposite user group active on the same platform. The entrant incurs a fixed cost of...
The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This year’s article provides first a general presentation of the role of the Chief Competition Economist’s team and surveys some of the main achievements of the Directorate General for Competition ov...
We empirically study the effects of broadband internet diffusion on local election outcomes and on local government policies using rich data from the U.K. Our analysis shows that the internet has displaced other media with greater news content (i.e. radio and newspapers), thereby decreasing voter turnout, most notably among less-educated and younge...
We consider a model where a monopolist can profile consumers in order to price discriminate among them, and consumers can take costly actions to protect their identities and make the profiling technology less effective. A novel aspect of the model consists in the profiling technology: the signal that the monopolist gets about a consumer's willingne...
The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly competitive markets. In this paper we summarize how this process has unfolded—for both fixed and mobile telecommunications—by focusing on the evolution of the regulatory framework and by drawing some...
The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This year’s article provides first a general presentation of the role of the Chief Competition Economist’s team and surveys some of the main achievements of the Directorate General for Competition ov...
We set up a stylized oligopoly model of uncertain product innovation to analyze the effects of a merger on innovation incentives and on consumer surplus. The model incorporates two competitive channels for merger effects: the “price coordination” channel and the internalization of the “innovation externality”. We solve the model numerically and fin...
We investigate the effects of price discrimination on prices, profits, and consumer surplus when (a) at least one competing firm can use consumers’ private information to price discriminate yet (b) consumers can prevent such use by paying a “privacy cost.” Unlike a monopolist, competing duopolists do not always benefit from a higher privacy cost be...
We analyze the optimal behavior of a platform providing essential inputs to downstream firms selling a primary and a second complementary good. Final demand is affected by consumer foresight, that is, consumers may not anticipate the ex post surplus from the secondary good when purchasing the primary good. We first set up a reduced‐form platform mo...
We set up a stylized oligopoly model of uncertain product innovation to analyze the effects of a merger on innovation incentives and on consumer surplus. The model incorporates two competitive channels for merger effects: the “price coordination” channel and the internalization of the “innovation externality” . We solve the model numerically and fi...
We set up a stylized oligopoly model of uncertain product innovation to analyze the effects of a
merger on innovation incentives and on consumer surplus. The model incorporates two
competitive channels for merger effects: the "price coordination" channel and the internalization
of the "innovation externality". We solve the model numerically and fin...
We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators' prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user pric...
The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This year’s article provides first a general presentation of the role of the Chief Competition Economist’s team and surveys the main achievements of the Directorate General for Competition over 2016/...
We analyze the impact of a merger on firms' incentives to innovate. We show that the merging parties always decrease their innovation efforts post-merger while the outsiders to the merger respond by increasing their effort. A merger tends to reduce overall innovation. Consumers are always worse off after a merger. Our model calls into question the...
This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. Our empirical strategy combines a boundary discontinuity design with controls for time-invariant effects and arbitrary macroeconomic shocks at a very local level to identify the causal effect of broadband spee...
We empirically study the effects of broadband internet diffusion on local election outcomes and on local government policies using rich data from the U.K. Our analysis shows that the internet has displaced other media with greater news content (i.e. radio and newspapers), thereby decreasing voter turnout, most notably among less-educated and younge...
We consider a data broker that holds precise information about customer preferences. The data broker can sell this data set either exclusively to one of two differentiated competing firms, or to both of them. If a downstream firm obtains the data set, it can practice personalized pricing, else it has to offer a uniform price to customers. The first...
The last decade has seen a strident public debate about the principle of “net neutrality.” The economic literature has focused on two definitions of net neutrality. The most basic definition of net neutrality is to prohibit payments from content providers to internet service providers; this situation we refer to as a one-sided pricing model, in con...
This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. We combine microdata on property prices in England between 1995 and 2010 with local availability of Internet broadband connections. Rich variation in Internet speed over space and time allows us to estimate th...
We consider a model where a monopolist can profile consumers in order to price discriminate among them, and consumers can take costly actions to protect their identities and make the profiling technology less effective. A novel aspect of the model consists in the profiling technology: the signal that the monopolist gets about a consumer's willingne...
Net neutrality (NN) is believed to prevent the emergence of exclusive online content, which yields Internet fragmentation. We examine the relationship between NN regulation and Internet fragmentation in a game- theoretic model that considers the interplay between termination fees, exclusivity, and competition between two Internet service providers...
We reconsider the impact that regulation of call termination on mobile phones has had on mobile customers' bills. Using a large panel covering 27 countries, we find that the " waterbed " phenomenon, initially observed until early 2006, becomes insignificant on average over the 10-year period, 2002-2011. We argue that this is related to the changing...
We propose a two-sided model with two competing Internet platforms, and a continuum of Content Providers (CP's). We study the effect of a net neutrality regulation on capacity investments in the market for Internet access, and on innovation in the market for content. Under the alternative discriminatory regime, platforms charge a priority fee to th...
This paper investigates the effects of price discrimination on prices, profits and consumer surplus, when one or more competing firms can use consumers' private information to price discriminate and consumers can pay a privacy cost to avoid it. While a monopolist always benefits from higher privacy costs, this is not true in the competing duopoly c...
We consider the impact of a regulatory process forcing an incumbent telecom operator to make its local broadband network available to other companies (local loop unbundling, or LLU). Entrants are then able to upgrade their individual lines and offer Internet services directly to customers. Employing a very detailed dataset covering the whole of the...
Compulsory licensing allows the use of a patented invention without the owner's consent, with the aim of improving access to essential drugs. The pharmaceutical sector argues that, if broadly used, it can be detrimental to innovation. We model the interaction between a company in the North that holds the patent for a certain drug and a government i...
We consider the impact of a regulatory process forcing an incumbent telecom operator to make its local broadband network available to other companies (local loop unbundling, or LLU). Entrants are then able to upgrade their individual lines and offer Internet services directly to customers. Employing a very detailed data set covering the whole of th...
Airports have become platforms that derive revenues from both aeronautical and commercial activities. The demand for these services is characterized by a one-way complementarity in that only air travelers can purchase retail goods at the airport terminals. We analyze a model of optimal airport behavior in which this one-way complementarity is subje...
The economic analysis of the digital economy has been a rapidly developing research area for more than a decade. Through authoritative examination by leading scholars, this publication takes a closer look at particular industries, business practices, and policy issues associated with the digital industry. The volume offers an up-to-date account of...
The distinguishing feature of two-sided markets is that the pricing structure, that is, the relative prices charged to each side, matters. Regulators need to understand and account for the interdependence of prices in both sides. Some interventions that lower the prices on one side can result in higher prices on the other side of such markets. This...
We propose a two-sided model with two competing Internet platforms, and a continuum of heterogeneous Content Providers (CPs). We study the effect of a net neutrality regulation on capacity investments in the market for Internet access, and innovation in the market for content. Under the alternative discriminatory regime, platforms charge a priority...
This paper studies the impact of the re-importation of imitated pharmaceu-ticals as a by-product of an open policy towards parallel import (PI) on process innovation. Foreign investment by a …rm to exploit a new unregulated market with weak intellectual property rights can give rise to imitation. These prod-ucts can potentially re-enter the origina...
We analyze the incentives of a vertically integrated firm to foreclose downstream rivals in a model of upstream price competition between suppliers of only imperfectly substitutable inputs. Our main motivation is a critical assessment of common assertions that draw inferences from pre-merger observable variables to post-merger incentives to foreclo...
We introduce a flexible model of telecommunications network competition with non-uniform calling patterns, which account for the fact that customers tend to make most calls to a small set of contacts. Equilibrium call prices are distorted away from marginal cost, and competitive intensity is affected by the concentration of calling patterns. Contra...
We study a model of film production, distribution and consumption. The studio can release two goods, a theatrical and a video version, and has to decide on its versioning and sequencing strategy. In contrast with the previous literature, we allow for the possibility that consumers watch both versions. This simple extension leads to novel results. I...
Interconnection rates are a key variable in telecommunications markets. Every call that is placed must be terminated by the network of the receiving party, thus the termination end has the characteristic of an economic bottleneck and is subject to regulation in many countries. This paper examines the impact of regulatory intervention to cut termina...
We study bargained input prices where up and downstream firms can choose alternative vertical partners. We apply our model to airport landing fees where a number of interesting policy questions have arisen. For example, what is the impact of joint ownership of airports? Does airline countervailing power stop airports raising fees? Should airports b...
How would abandoning Internet net neutrality affect content providers that have different size? We model an Internet broadband provider that can offer a different quality of service (priority) to heterogeneous content providers. Internet users can potentially access all content, although they browse and click ads with different probabilities. Net n...
This paper proposes a North–south model to study the interaction between price regulation policies and parallel trade, with a particular focus on the pharmaceutical sector. We show that, under parallel trade, R&D investment can rise only when the South government takes into full account its impact both on investment and on the firm’s decision to su...
We study a model of film production, distribution and consumption. The studio can release two goods, a theatrical and a video version, and has to decide on its versioning and sequencing strategy. In contrast with the previous literature, we allow for the possibility that consumers watch both versions. This simple extension leads to novel results. I...
We study the existence of countervailing buyer power in a vertical industry where the input price is set via Nash bargainings between one upstream supplier and many differentiated but competing retailers. In case one bilateral bargaining fails, the supplier still has the ability to sell to the other retailers. We show that the capacity of these oth...
We determine explicitly the fully nonlinear equilibrium tariffs in a simple tractable model where two firms compete for consumers whose private preferences for products and quantities are correlated because they mix both goods. Contrary to the existing literature assuming uncorrelated preferences, neither full exclusivity nor two-part tariffs can a...