Economic research

Below are details of reports recently published under the OFT's ongoing programme of economic research. Further current and completed research is available, listed through the links at the bottom of the page.

Research reports can also be accessed through the economic research publications page.

Most recent economic research

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Anti-Competitive Effects of RPM (Resale Price Maintenance) Agreements in Fragmented Markets

It is widely recognised that RPM agreements can facilitate collusion or exclude potential competitors where there is significant market power at one or both levels of the vertical supply chain. This report evaluates, and extends to increasingly fragmented markets, a number of models which have posited that networks of RPM agreements between multiple manufacturers and retailers may also soften competition where there is no market power. The report also assesses the practical implications of the findings for the OFT and identifies key characteristics that might indicate when consumer harm is more likely.

Download the report (pdf 1.9Mb)

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The Economics of Secondary Product Markets

A report prepared for the OFT by Compass Lexecon.

Where there is competition in a primary market, but a lack of competition in a secondary market, for example due to consumers being partially or completely locked in to the secondary product following the purchase of the primary product, then the market power in the secondary market may result in the firm earning high profits. However, these high secondary profits may induce additional competition, and therefore lower prices, in the primary market. This has been termed a 'waterbed effect'. A complete waterbed effect occurs when all additional secondary market profits are competed away in the primary market. The report considers whether, when and to what extent high secondary market profits can be expected to be offset by low primary market pricing and identifies a number of observable factors which may indicate whether the waterbed effect is more or less likely to be complete.

Download the report (pdf1.4Mb)

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Price Relationship Agreements

PRAs are arrangements linking one supplier's price to those charged to other customers or by competitors. Examples of PRAs include 'most favoured nation' clauses (MFNs), price guarantees, and meeting competition clauses. The report provides a comprehensive literature review of PRAs, bringing together different economic theories of harm and efficiency motivations for the different types (and critiques of these theories) and drawing out possible policy implications.

Download the report (pdf 2.8Mb)

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Competition and Growth

This economic discussion paper provides evidence of the links between competition and growth, considering how competition can contribute to the better utilisation of capital, labour and natural resources, and to increased innovation and better management, and highlights the role of government and competition authorities in ensuring that these links are maximised.

Download the report (pdf 395kb)

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Conjectural Variations and Competition Policy: Theory and Empirical Techniques

The report questions whether incorporating firms' conjectures of how their rivals will react to price changes will impact competition policy. Specifically the report looked how firms' conjectures impact on (i) unilateral merger analysis, (ii) coordinated merger analysis and (iii) empirical estimates of the degree of competition.
A report prepared for the OFT by RBB.

Download the report (pdf 3.58mb)

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Consumer behavioural biases in competition

The report carries out a review of how consumer behavioural biases impact firms' decisions and hence the competitive equilibria.

Download the report (951kb)

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The impact of price frames on consumer decision making

This report examines the impact on consumer decision-making of different ways in which prices can be framed.

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Choice and competition in the delivery of public services

A report prepared for the OFT by Frontier Economics.

Download the report (pdf 658kb) and case studies (pdf 1.34Mb)

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