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New Developments in Competition Policy

Objective

"My goal is to shed light on the competition implications of two recent much-talked about developments in business, namely the surge of new financial derivatives and the high bonuses paid out to CEOs. First, there has been a rapid expansion of financial markets in the last decade and the therein used instruments, so-called financial derivatives. These products are generally not publicly exchanged on a market, which makes it hard to know how much they are used. But it is, for example, estimated that derivatives consist of between 20% and 40% of the total daily value traded on the London Stock Exchange. This same opaqueness of financial derivatives –apart from having likely been one of the causes of the current economic difficulties- has created a new array of tools for firms to change the rules of the game into anti-competitive, yet hard to detect ways. For example, a firm can buy a contract such that it benefits from a rival’s share price to decrease, which is a credible commitment to behave aggressively against that rival. Second, the use of large bonuses for managers has received a lot of criticisms in the press lately. But it has been largely neglected in economic research that these bonuses may also affect how managers, and the firms they lead, compete. It may occur, for example, that bonuses may motivate managers to collude with their competitors. It is perhaps time to more deeply explore how bonuses -and more in general the design of contracts in the firm- may affect managers’ decisions to infringe competition laws. In my project, I shall study the competitive effects of widely used financial derivatives and executive bonuses, and I will do this both from a theoretical and empirical perspective."

Field of science

  • /social sciences/economics and business/business and management/commerce

Call for proposal

FP7-PEOPLE-2010-IEF
See other projects for this call

Funding Scheme

MC-IEF - Intra-European Fellowships (IEF)

Coordinator

UNIVERSITEIT VAN AMSTERDAM
Address
Spui 21
1012WX Amsterdam
Netherlands
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 177 340,80
Administrative Contact
André Oosten (Mr.)