2017-06-02 11:09:36      点击:

Measuring the Net Welfare Costs of Anti-competitive Market Distortions

1.      Introduction:

“Anticompetitive market distortions” or “ACMDs” are the restrictions that involve government actions that empower certain private interests to obtain or retain artificial competitive advantages over their rivals, be they foreign or domestic. With the growing internationalization of commerce, ACMDs not only diminish domestic consumer welfare but also have a harmful effect on foreign enterprises that seek to do business in the country imposing the restraint.  随着电子商务日益国际化的发展,反竞争化不仅仅对国内的企业有一定的影响,对国企也有一定的影响。

The World Trade Organization (WTO) has not been able to cope adequately with ACMDs. However, it suggests that the multilateral International Competition Network (“ICN”) – and, in particular, the ICN’s Advocacy Working Group – may be a possible near term vehicle for beginning to confront, or at least beginning to highlight, the harm of ACMDs.

In order to better assess and compare individual ACMDs – and to build the case for phasing out or dismantling them – a measurement should be devised to produce estimates of welfare effects of particular restrictions. Historically, analysis of behind the border trade barriers, or regulatory protection has focused on the impact of these barriers on trade flows. However, it does not properly measure the true impact of the ACMD under scrutiny on the domestic economy in the country where the ACMD exists.

Inspired by our focus on harm to competition, we proposed a better method which is a welfare-based metric based on the implications of the measure for consumer welfare. This methodology is drawn from the OECD Competition Assessment Toolkit (“Toolkit”)[1], which seeks to help “governments to eliminate barriers to competition by providing a method for identifying unnecessary restraints on market activities and developing a method for identifying unnecessary restraints on market activities and developing alternative, less restrictive means that still achieve government policy objectives.” The toolkit focuses specifically on rules and regulations that (1) limit the number and range of suppliers, (2) limit the ability of suppliers to compete, (3) reduce the incentives of suppliers to compete, (4) limit the choices and information available to consumers, and (5) apply to state-owned enterprises (SOEs). In addition to these particular practices, ACMDs may take the form of tax legislation that confers benefits on preferred companies, as well as regulatory and enforcement actions.



Following the proposal for developing the metric, this article estimates the net welfare costs of ACMDs using one of the notable examples that reflect the rules and restrictions the toolkits focused on and were not applied to the right metric for analyze in the current WTO framework. Although any metric measuring the net welfare is bound to be imprecise in application, it should be possible to produce “rough and ready” estimates of the social costs of ACMDs through this exercise. Such a metric could help strengthen the hand of the ICN – and of reform-minded public officials – in building the case for the dismantling of these constraints, or their replacement by less costly means for benefiting favored constituencies. It might also inspire a broader international dialogue on welfare-reducing government measures.


这篇文章当中最重要的不是从老师那里搬出来的就是基于FUJIkodak case的那个估算的部分。这个是老师提出的metric的具体的估算。老师的意思是,如果有了dataset,那么就能够进行分析,解释现在的情况,同时这个model是可以应用到很多的商业问题上的(因为这些问题都是因为文章当中提到的5rules and restrictions引起的)。如果我后面要继续跟着他做,研究的方向就是把这个模型搭出来,看看它如何解释现在的情况,同时是否能够对未来进行一些估测。

因为这篇文章和后面的一篇决定了我是否能够跟这个导师做研究,对我至关重要(他需要根据这两个writing sample看我的writing skill)。拜托请一定一定帮我弄的好一点。

2.     OECD Tool Kits and Metrics

The welfare-based metric is a better measure based on the implications of the measure for consumer welfare. The type of analysis would be a standard partial equilibrium analysis[2] where the ACMD itself would act as an external shock and the reduction in consumer welfare occasioned by this shock would be measured.

Toolkits focused on five rules and restrictions, each of which includes many practices. Due to the paragraph limitation(因为篇幅有限?), we took the case of Kodak / Fuji Film and quantified the consumer welfare applying a standard partial equilibrium analysis. We could also apply the same standard partial equilibrium analysis with other examples implicating every rule and restriction listed in the toolkits. This estimate is a rough estimate plus or minus a certain percentage (error tolerance). By recognizing imperfections in estimation and limitations on knowledge, it adds credibility highlighting the real harm to domestic interests flowing from ACMD.

2.2. Kodak and Fuji Film

Kodak accused Japan in 1995 of helping Fuji maintain a monopoly by denying Kodak fair access to two-thirds of Japan's $13 billion film market, which Kodak alleges are effectively blocked by Fujifilm’s control of the distribution system.


Kodak film is sold in approximately 15% of the retail outlets, which account for approximately 30% of film sales in Japan. Kodak’s sales are primarily in the large metropolitan areas, where it uses its Nagase sales force to supply large retailers and some secondary whole-salers. This segment of the market is contested by the two firms, and prices are low and competition fierce. In smaller towns and in areas served by small retailers in the large metropolitan areas, Kodak film is generally not available and prices are high and stable over time. This is the uncontested segment of the market.

In consumer photographic film, Kodak and Fujifilm dominate their home markets and have comparable market shares in the rest of the world. The market shares in Japan, the United States and the rest of the world are presented in Table 1. [3] With the chart (figure 1) of Kodak Market shares in Japan, 1972-1994[4], you could see its market share was declined from 11%(in 1983) to 8%(in 1995). And it filed its Super 301 complaints in 1995.

Table 1    Market Shares in Global Competition

Market Share %


United States

Rest of World









NB Konica has the second largest share in Japan.


          Figure 1   Kodak Market Shares in Japan, 1972-1994

The US trade Representative initiated WTO dispute resolution proceedings against Japan 1996. Despite the fact that the WTO Appellate Body in 1998 found the restraint in question did not implicate violations of Japan’s WTO trade commitments in 1998, the restraints involving practices that included government-supported restrictions on file distribution channels are accepted by WTO.

2.2. Hypothesis (?) for the estimation

To start the rough estimate, we set the following hypothesis:

1)      The Japan market share of Kodak drop from 11% (1982) to 8% (1990) is purely due to the government-supported restrictions on file distribution channel.

2)      The total film market size in Japan remained stable, which means the actual number of the market size is a constant;是一个常数

3)      There were limited restrictions in 1982 and Kodak’s supply-and-demand model reached its supply and demand equilibrium.

4)      It is a partial equilibrium model that is based on only a restricted range of data of film market, where the clearance on the market of some specific goods is obtained independently from prices and quantities in other markets.

2.3     Estimate

Assuming the overall film market share of Japan is Qs. In 1982, the supply and demand of Kodak film in Japan reached its equilibrium and the curves meet at Point A. If we assume Kodak’s cost is P1, then A ‘s point will be (11%Qs, P1) as it is shown in the chart. Figure 2. (这个图我后面会自己重新在ppt里面做好看)


With the restrictions from the government and limitation of distribution channels, the cost of the product will increase to reach its customers. As it shown on chart2, the cost Pcost2 will go upper above cost1. Because of this, the market share start to decrease, which means the quantity of the supply – product Kodak film –start to reduce, till 8% in 1994. As the reduction of quantity, the equilibrium was broken. The prices will adjust dynamically until supply equals demand and it reaches its new equilibrium. The supply and demand curves meet at B (8%Qs, P2)

To make a rough estimation, we assume P2 is 1.2 times of P1. Then the area of ABC will be a deadweight loss which is a loss of economic efficiency that occurs when equilibrium for a good or service is not Pareto optional. In other words, either people who have more marginal benefit than marginal cost are not buying the product, or people who have more marginal cost than marginal benefit are buying the product.

The equation of estimate the deadweight loss area will be:

SABC = 积分的面积 (不会打积分的符号帮我打一下吧,就是中间阴影部分的面积)

If we have data set to simulate the curve of equilibrium ( 如果我们有足够的数据去模拟出来均衡曲线的弧度的话)we could get a relationship of P1 and P2, also the relationship of P2 and P3. Then we could quantify the deadweight loss and consumer surplus.

Since the dynamic movement of supply and demand in this case is purely caused by the government policy, which limited the number and range of suppliers according to the OECD toolkit. The deadweight loss will be considered as the net cost of the welfare.

2.4     Apply the model to other rules

Fuji and Kodak film is only one of the many examples that fit the rules and restrictions of OECD. If we go deeper to the rules, we could find many examples and quantify the cost of ACMDs.

When China joined the World Trade Organisation, a network of internal restrictions, laws and regulations continue limits the ability of suppliers to Compete. For example, in China’s smartphone market – the world’s largest – the government developed a standard for domestic wireless services in consultation with China Mobile, a state-owned enterprise. The resulting standard is easy for China Mobile to meet, but costly for foreign companies, such as Apple and Nokia, which are trying to establish themselves. Partly as a result China Mobile continues to control two-thirds of the market.

3 Conclusions

  These anti-competitive market distortions ( ACMDs) – from Film industry in Japan to telephone monopolies in China – are one of the most pernicious problems in international trade today. It hurt consumers in countries that use them by raising costs, compromising quality and slowing domestic growth. The ICN’s Advocacy Working group may provide a good vehicle to assist competition agencies worldwide to confront the harm of ACMDs. Further development of a metric estimate the net welfare costs of ACMDs. The metric, which could be refine in light of economic learning and case studies, might help inspire a broader international dialogue on welfare-reducing government measures. Such a metric could help strengthen the hand of ICN to lead some jurisdictions to chip away at, if not wholly dismantle, harmful ACMDs – or at least to begin to replace ACMDs with less harmful means of benefiting favoured constituencies.