Measuring the Rate of Return for Competition Law

30 Pages Posted: 20 Jan 2007

See all articles by Paul A. Grout

Paul A. Grout

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Date Written: January 2007

Abstract

This paper focuses on the application and interpretation of measures of rate of return for competition law. Amongst other results we analyse how outsourcing and similar arrangements impact on the rate of profitability and show that the measurement is more volatile the greater the rate of profit, suggesting that the measures are most problematic when they are most needed. We identify and interpret the outsourcing arrangements that provide the lowest rate of profit and show that these arrangements have a close relationship to net present value. Finally, we provide suggestions to make profitability measures more informative for competition law.

Keywords: internal rate of return, accounting rate of return, cost of capital, profitability measures, competition

JEL Classification: K21, L43, G38

Suggested Citation

Grout, Paul A. and Zalewska, Anna, Measuring the Rate of Return for Competition Law (January 2007). Available at SSRN: https://ssrn.com/abstract=957931 or http://dx.doi.org/10.2139/ssrn.957931

Paul A. Grout

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )

Mary Paley Building
12 Priory Road Department of Economics
Bristol BS8 1TN
United Kingdom

Anna Zalewska (Contact Author)

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

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