Competition Policy in Selection Markets

CPI Antitrust Chronicle Submission, August 2014

9 Pages Posted: 23 Aug 2014  

Neale Mahoney

University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)

Andre Veiga

University of Oxford - Nuffield College

E. Glen Weyl

Microsoft Research; Yale University

Date Written: August 21, 2014

Abstract

Selection markets, like insurance and finance, where the value of customers depends on their identity, create fundamental challenges for competition policy. Competition is often harmful in these markets either by creating socially excessive supply or leading to degradation of product quality. Standard indicators used to gauge policies, such as upward pricing pressure, are also often mis-calibrated in these settings. We summarize for a policy audience and draw competition policy conclusions from two recent papers on the interaction between competition policy and selection, using calibrations to sub-prime auto lending and health insurance.

Keywords: competition policy, selection markets, cream-skimming, merger analysis, sub-prime lending, health insurance

JEL Classification: D40, D82, G20, I11, K21, L41

Suggested Citation

Mahoney, Neale and Veiga, Andre and Weyl, E. Glen, Competition Policy in Selection Markets (August 21, 2014). CPI Antitrust Chronicle Submission, August 2014. Available at SSRN: https://ssrn.com/abstract=2484738 or http://dx.doi.org/10.2139/ssrn.2484738

Neale Mahoney

University of Chicago Booth School of Business ( email )

5807 South Woodlawn Ave
Chicago, IL 60637
United States
773.702.9278 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andre Veiga

University of Oxford - Nuffield College ( email )

New Road
Oxford, OX1 1NF
United Kingdom

HOME PAGE: http://www.andreveiga.com

Eric Glen Weyl (Contact Author)

Microsoft Research ( email )

641 Avenue of the Americas
7th Floor
New York, NY 10011
United States
(857) 998-4513 (Phone)

HOME PAGE: http://www.glenweyl.com

Yale University ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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