1. Are more experienced experts tougher? Evidence from competition law. Ludivine Garside, Paul Grout & Anna Zalewska 2 March 2006 Centre for Market and Public Organisation

2. March 2006Garside, Grout & Zalewska2 Outline Motivation Data Results

3. March 2006Garside, Grout & Zalewska3 Why might experience matter? 1.Experience – updating: Meisner & Kassin (L&HumBeh 2002) – Handberg & Tate (AmJPol Science 1991) 2.Judges life tenure (Supreme Court: Stras Minnesota LR 2006) 3.Public officials generally – economic decisions 4.Other factors (Ashenfelter et al JLS 1995; Ichino et al EER 2003)

4. March 2006Garside, Grout & Zalewska4 How might if work? 1.Heterogeneous priors/confirmatory bias/correlated tenure: Rabin & Schrag (QJE 1999) 2.Experience – updating 3.Career concerns

5. March 2006Garside, Grout & Zalewska5 Why Competition law excellent framework for this purpose lots of data to condition on and clear theory of how it should work unique detailed data set

6. March 2006Garside, Grout & Zalewska6 239 merger references 113 market investigation references 32 public sector references 14 licence modifications 11 anti-competitive references 6 general references 7 airport (quinquennial) 3 monopoly & public sector 1 broadcasting 1 restrictive labour practices 1 unclassified UK I Abuse regime (as opposed to prohibition regime) – restraints of trade in principle acceptable, unless they can be argued to be detrimental to the common good 428 references to the Competition Commission (1970-2003)

7. March 2006Garside, Grout & Zalewska7 UK II Preliminary investigation (Office of Fair Trading, OFT) Reference to Competition Commission by OFT Investigators appointed from amongst Reporting panel members Investigation report submitted to Secretary of State –identification of the relevant market(s) –conclusions as to adverse effect on competition or detrimental effects on customers –recommendations as to possible remedies Investigation report published

8. March 2006Garside, Grout & Zalewska8 UK III 1973 to Feb 2000: Fair Trading Act 1973 (c. 41) prior to 1973: Monopolies & Restrictive Practices (Inquiry & Control) Act 1948 & Restrictive Trade Practices Act 1956 & Monopolies & Mergers Act 1965 by Director General of Fair Trading or by Secretary of State References made

9. March 2006Garside, Grout & Zalewska9 Data I Investigations: referred to the Competition Commission (C.C.), formerly Monopolies & Mergers Commission (MMC) for possible abuse of a monopoly situation published between 1970 - 2003

10. March 2006Garside, Grout & Zalewska10 Data II Investigation level: –431 company observations, –85 cases –122 company observations with profitability, (1970-1996) (1970-2003)

11. March 2006Garside, Grout & Zalewska11 Data III

12. March 2006Garside, Grout & Zalewska12 Data IV

13. March 2006Garside, Grout & Zalewska13 Data V

14. March 2006Garside, Grout & Zalewska14 Data VI

15. March 2006Garside, Grout & Zalewska15 Firm levelCase level Least experienced 0.550.51 Second least experienced0.450.69 Second most experienced0.710.74 Most experienced0.78 Least experienced0.470.59 Mid experienced0.620.68 Most experienced0.780.80

16. March 2006Garside, Grout & Zalewska16 Approach Probit Independent cases Firm-level observations cannot be treated as independent Use robust standard error estimates to account for intra- cluster correlation (at case level and at chairman level)

17. Pseudo R 2 0.1860.2440.18660.2480.1890.2090.1840.189 Constant-0.586 (0.502) -0.492 (0.563) -0.591 (0.510) -1.475*** (0.544) -0.508 (0.510) 0.074 (0.644) -0.381 (0.462) -0.929 (0.579) Chair experience3.179** (1.326) 3.309* (0.010) 3.114** (1.374) 3.186** (1.305) 3.431** (1.623) 2.869** (1.231) Gender ratio3.330 ** (1.543) 3.582** (1.638) 3.311** (1.591) 3.252** (1.522) 3.468** (1.632) 2.796* (1.649) 3.345** (1.533) 3.267** (1.543) Market share0.820* (0.446) 0.996** (0.497) 0.838* (0.486) 1.230*** (0.470) 0.799* (0.462) 0.773* (0.455) 0.753* (0.451) 0.840* (0.443) Climate-1.204 (0.998) -1.847* (0.945) -1.226 (0.985) -1.820** (0.904) -1.432 (1.013) -1.016 (1.006) -1.162 (0.993) -1.223 (1.000) Two anti-competitive conducts 0.956*** (0.355) 0.996** (0.441) 0.958*** (0.341) 0.969*** (0.339) 0.936** (0.370) 1.036*** (0.344) 1.000*** (0.358) 0.926*** (0.355) Repeated investigation-0.700* (0.425) -0.732 (0.127) -0.703* (0.427) -0.678* (0.412) -0.687 (0.427) -0.692* (0.419) -0.717* (0.425) -0.714* (0.426) Concentration ratio (3 firms) -1.554 (0.196) Minimum efficient size0.006 (0.100) Market share volatility0.189 (0.189) Dummy 19900.031 (0.393) Dummy 19801.151*** (0.362) Dummy Labour-0.181 (0.481) Wogrex-6.285 (4.259) (Chair experience) 2 9.120** (4.125) (Chair experience) 1/2 2.277*** (0.874) Full company data set

18. Pseudo R 2 0.2470.302 0.2450.249 Constant-0.419 (0.719)-0.394 (0.734)-1.7551** (0.788) -0.172 (0.7016)-0.828 (0.770) Chair experience3.806*** (1.424) 3.822*** (1.421) 4.730*** (1.394) Gender ratio3.987*** (1.418) 4.007*** (1.466) 3.726*** (1.393) 4.014*** (1.424) 3.898*** (1.417) Market share of investigated firm1.126** (0.508) 1.113** (0.520) 1.428*** (0.526) 1.090** (0.511) 1.125** (0.509) Climate-1.900** (-0.870) -1.888** (0.918) -2.179*** (0.789) -1.883** (0.877) -1.920** (0.868) Two anti-competitive conducts1.586*** (0.498) 1.594*** (0.525) 1.278** (0.506) 1.650*** (0.497) 1.552*** (0.501) Repeated investigation-0.751* (0.437)-0.755* (0.448)-0.580 (0.412)-0.780* (0.436)-0.757* (0.435) Monopoly pricing-0.543 (0.514)-0.548 (0.521)-0.420 (0.502)-0.565 (0.521)-0.517 (0.514) Discriminatory pricing-0.796 (0.699)-0.809 (0.643)-0.431 (0.643)-0.787 (0.703)-0.825 (0.697) Collusive pricing-0.266 (0.650)-0.294 (0.709)0.365 (0.643)-0.330 (0.647)-0.258 (0.648) Predatory pricing1.015 (0.120)1.012 (0.649)1.065 (0.672)1.074 (0.663)0.981 (0.643) Vertical integration0.198 (0.631)0.1775 (0.668)0.328 (0.602)0.205 (0.635)0.165 (0.624) Tie in sales-0.082 (0.725)-0.093 (0.728)-0.052 (0.723)-0.087 (0.720)-0.101 (0.725) Exclusive purchasing-0.570 (0.709)-0.582 (0.709)-0.165 (0.617)-0.563 (0.718)-0.582 (0.704) Resale price maintenance-0.693 (0.594)-0.696 (0.584)-0.708 (0.553)-0.634 (0.593)-0.717 (0.597) Dummy 1990-0.031(0.437) Dummy 19801.255*** (0.363) (Chair experience) 2 10.593** (4.302) (Chair experience) 1/2 2.759*** (0.978)

19. Pseudo R 2 0.2420.2490.2430.2770.2800.281 Constant -1.727** (0.717) -.1956** (0.776) -1.730** (0.719) -1.423 (0.893) -1.646* (0.976) -1.286 (0.914) Chair experience 5.377** (2.234) 5.666** (2.238) 5.448** (2.275) 5.317** (2.523) 5.627** (2.570) 5.258** (2.558) Gender ratio 3.996** (1.625) 4.027** (1.646) 4.063** (1.655) 3.981** (1.757) 3.961** (1.767) 4.173** (1.778) Market share of the biggest investigated firm 2.421*** (0.864) 2.436*** (0.863) 2.405*** (0.869) 3.066*** (1.044) 3.059*** (1.040) 3.000*** (1.055) Climate -0.705 (0.977) -0.875 (1.008) -0.600 (1.090) -0.920 (1.068) -1.019 (1.086) -0.563 (1.196) Two anti-competitive conducts 1.582*** (0.532) 1.591*** (0.542) 1.574*** (0.531) 2.279*** (0.718) 2.217*** (0.719) 2.350*** (0.734) Repeated investigation -0.500 (0.413) -0.548 (0.421) -0.482 (0.420) -0.625 (0.443) -0.638 (0.444) -0.617 (0.443) Dummy 1980 0.326 (0.398) 0.257 (0.424) Dummy 1990 -0.083 (0.386) -0.295 (0.443) Monopoly pricing -0.809 (0.555) -0.787 (0.559) -0.851 (0.561) Discriminatory pricing -0.940 (0.621) -0.859 (0.640) -1.054 (0.643) Collusive pricing -0.309 (0.641) -0.220 (0.665) -0.517 (0.716) Vertical integration -0.726 (0.641) -0.722 (0.643) -0.871 (0.676) Tie in sales -0.596 (0.637) -0.591 (0.632) -.734 (0.676) Exclusive purchasing -0.560 (0.580) 0.257 (0.424) -0.632 (0.595) Case data set

20. March 2006Garside, Grout & Zalewska20 dy/dxX Chair experience1.162** (0.514) 0.147 Gender ratio1.217** (0.547) 0.138 Market share0.300* (0.171) 0.202 Climate-0.440 (0.366) 0.236 Two anti-competitive conducts0.333*** (0.111) 0.455 Repeated investigation-0.262 (0.162) 0.339 Predicted value = 0.662

21. Pseudo R 2 0.2110.277R 2 0.217R 2 0.397 Constant -0.507 (0.517) -0.685 (0.750) 0.332** (0.165) 0.464* (0.263) Chair experience 3.386** (1.543) 5.224** (2.105) 0.955** (0.427) 1.558** (0.638) Gender ratio 3.406** (1.531) 4.088*** (1.405) 1.035* (0.522) 0.823 (0.562) Market share 0.858* (0.472) 1.154** (0.502) 0.245* (0.145) 0.030 (0.154) Climate -1.444 (0.908) -2.099*** (0.807) -0.351 (0.354) -0.327 (0.318) Two anti-competitive conducts 1.001*** (0.342) 1.301** (0.522) 0.275*** (0.096) 0.259** (0.119) Repeated investigation -0.672 (0.416) -0.557 (0.434) -0.237 (0.149) -0.290* (0.158) Dummy J. Le Quesne -0.824 (0.658) -1.273** (0.648) All chairmen dummies Dummy A.Roskill -0.025 (0.429) -0.020 (0.573) Monopoly pricing insignificant Discriminatory pricing insignificant Collusive pricing insignificant Predatory pricing insignificant Vertical integration insignificant Tie in sales insignificant Exclusive purchasing insignificant Resale price maintenance insignificant Full data set

22. Pseudo R 2 0.1870.1660.2530.236 Constant -0.220 (1.789) -0.389 (1.737) -3.211 (2.279) -3.240 (2.260) Chair experience 3.284** (1.473) 3.519** (1.567) Gender ratio 3.267** (1.545) 3.171** (1.506) 4.508*** (1.422) 4.308*** (1.468) Market share of investigated firm 0.828* (0.446) 0.792* (0..464) 1.096** (0.513) 1.133** (0.522) Climate -1.212 (1.002) -1.253 (0.997) -1.910** (0.853) -1.994** (0.889) Two anti-competitive conducts 0.939** (0.372) 1.016*** (0.375) 0.904 (0.564) 0.928* (0.556) Repeated investigation -0.712* (0.422) -0.833** (0.422) -0.710* (0.432) -0.858** (0.428) Age -0.006 (0.028) 0.005 (0.025) 0.0329 (0.0382) 0.041 (0.037) Monopoly pricing 0.210 (0.717) 0.344 (0.734) Discriminatory pricing 0.793 (0.666) 0.888 (0.669) Collusive pricing 0.344 (0.716) 0.223 (0.726) Predatory pricing 1.977*** (0.700) 2.229*** (0.696) Vertical integration 1.161* (0.699) 1.173 (0.718) Tie in sales 0.685 (0.612) 0.701 (0.642) Exclusive purchasing 0.194 (0.622) 0.121 (0.674) Resale price maintenance -0.136 (0.654) 0.041 (0.037)

23. No of observations 431 Pseudo R 2 0.2070.2900.1790.244 Constant -0.432 (0.507) -0.817 (0.665) 0.147 (0.398) -0.209 (0.697) Chair experience 3.743*** (1.326) 6.591*** (1.939) Gender ratio 3.097** (1.600) 3.674*** (1.360) 2.858* (1.515) 3.116** (1.421) Market share of investigated firm 0.707 (0.450) 0.848 (0.521) 0.708 (0.467) 0.972* (0.520) Climate -1.254 (0.989) -1.850** (0.787) -1.272 (0.964) -1.900** (0.869) Two anti-competitive conducts 1.076*** (0.353) 1.147** (0.545) 1.104*** (0.354) 0.913* (0.495) Repeated investigation -0.788* (0.436) -0.814** (0.402) -0.944** (0.450) -1.018** (0.409) Monopoly pricing -0.084 (0.658) 0.301 (0.679) Discriminatory pricing 0.605 (0.628) 0.828 (0.664) Collusive pricing 0.179 (0.635) 0.232 (0.663) Predatory pricing 1.622* (0.922) 1.934 (0.805) Vertical integration 0.991 (0.634) 0.965 (0.677) Tie in sales 0.000 (0.647) 0.336 (0.625) Exclusive purchasing 0.133 (0.577) 0.385 (0.589) Resale price maintenance -0.824 (0.681) 0.068 (0.579) CC chairman -0.536 (0.377) -1.154** (0.472) -0.431 (0.373) -0.647* (0.360)

24. No of observations 85 431 Pseudo R 2 0.2420.277 0.1860.247 Constant -1.727*** (0.717) -1.424** (0.647) -0.586 (0.539) -0.419 (0.730) Chair experience 5.377*** (2.234) 5.317** (2.133) 3.179*** (1.163) 3.806*** (1.224) Gender ratio 3.996** (1.625) 3.981** (1.905) 3.330** (1.485) 3.987*** (1.510) Market share 2.421*** (0.864) 3.066*** (0.800) 0.820* (0.464) 1.126** (0.508) Climate -0.705 (0.977) -0.920 (1.106) -1.204 (1.025) -1.900** (0.925) Two anti-competitive conducts 1.582*** (0.532) 2.279*** (0.603) 0.956** (0.394) 1.586*** (0.568) Repeated investigation -0.500 (0.413) -0.625 (0.496) -0.700* (0.418) -0.751 (0.473) Monopoly pricing -0.809* (0.468) -0.543 (0.464) Discriminatory pricing -0.940 (0.695) -0.796 (0.683) Collusive pricing -0.309 (0.563) -0.266 (0.636) Predatory pricing 1.015* (0.590) Vertical integration -0.726* (0.426) 0.198 (0.465) Tie in sales -0.596 (0.390) -0.082 (0.682) Exclusive purchasing -0.559 (0.494) -0.570 (0.726) Resale price maintenance -0.693 (0.524) Clustered by chairman

25. Pseudo R 2 0.1970.2860.3250.286 Constant -0.556 (0.501) 0.294 (0.672) -1.473** (0.738) -0.375 (0.729) Chair experience 3.802*** (1.434) 7.338*** (2.151) 7.486*** (2.148) 7.332*** (2.154) Gender ratio 3.591** (1.645) 5.135*** (1.417) 4.774*** (1.422) 5.096*** (1.447) Market share 0.855* (0.441) 0.951* (0.513) 1.252** (0.518) 0.991* (0.531) Climate -1.314 (1.006) -1.982** (0.847) -2.217*** (0.772) -2.028** (0.853) Two anti-competitive conducts 1.018*** (0.351) 1.729*** (0.494) 1.459*** (0.503) 1.708*** (0.516) Repeated investigation -0.615 (0.409) -0.572 (0.413) -0.450 (0.398) -0.556 (0.416) Legal background -0.360 (0.310) -1.018** (0.471) -0.826* (0.473) -1.033** (0.472) Monopoly pricing insignificant Discriminatory pricing insignificant Collusive pricing insignificant Predatory pricing insignificant Vertical integration insignificant Tie in sales insignificant Exclusive purchasing insignificant Resale price maintenance -1.761** (0.791) -1.580** (0.733) -1.767** (0.787) Dummy 1980 1.075*** (0.361) Dummy 1990 0.101 (0.422)

26. No of observations431 8581 no DK 381 no DK Pseudo R 2 0.1890.2110.3270.1750.2430.2860.290 Constant -0.042 (0.429) -0.501 (0.528) -0.587 (0.658) -0.727 (0.478) -1.746** 0.717) -1.505* (0.898) -0.708 (0.689) Chair experience 3.104** (1.425) 3.314*** (1.214) 7.536*** (2.029) 3.948** (1.570) 5.593** (2.265) 5.600** (2.575) 7.678*** (2.068) Gender ratio 2.232* (1.343) 3.376** (1.357) 3.311* (1.699) 3.245* (1.835) 3.213** (1.488) Market share 0.491 (0.479) 0.762 (0.481) 0.975* (0.502) 1.674*** (0.636) 2.466*** (0.864) 3.158*** (1.045) 1.060** (0.511) Climate -1.374* (0.744) -1.144 (0.958) -1.763** (0.761) -0.959 (0.830) -0.746 (0.982) -0.943 (1.072) -1.854** (0.750) Two anti-competitive conducts 0.655* (0.348) 0.875** (0.411) 1.337*** (0.476) 1.196*** (0.366) 1.603*** (0.536) 2.332*** (0.723) 1.358*** (0.481) Repeated investigation -0.622 (0.391) -0.717* (0.416) -0.358 (0.409) -0.274 (0.381) -0.510 (0.421) -0.596 (0.452) -0.394 (0.427) Monopoly pricingInsignificant Discriminatory pricing -0.821 (0.617) -1.138* 0.653) -0.722 (0.665) Collusive pricing Insignificant Predatory pricing 1.191** (0.536) 1.284** (0.564) Vertical integration Insignificant Tie in sales Insignificant Exclusive purchasing Insignificant Resale price maintenance -1.253* (0.669) -1.123 (0.721) Dummy D. Kingsmill 2.013** (0.927) 1.434*** (0.418) 2.036*** (0.621) Legal background -1.140*** (0.415) -1.126*** (0.421) Gender

27. March 2006Garside, Grout & Zalewska27 Pseudo R 2 0.3250.3300.3320.3340.3520.372 Constant -1.329** (0.601) -1.417** (0.562) -1.540*** (0.567) -1.405** (0.601) -1.401** (0.604) -1.367** (0.622) Chair experience 3.079** (1.468) 3.358** (1.345) 2.647* (1.583) 3.651*** (1.421) 4.453*** (1.296) 4.860*** (1.356) Gender ratio 3.629* (1.862) 3.252* (1.823) 4.268** (1.881) 3.702** (1.884) 3.577* (1.866) 3.956** (1.807) Market share 1.992*** (0.742) 1.946*** (0.753) 2.112*** (0.741) 1.909** (0.758) 2.300*** (0.825) 2.278*** (0.851) Climate -1.689 (1.272) -1.887 (1.280) -0.397 (0.1.243) -2.243* (1.337) -2.852** (1.371) -2.822** (1.400) Two anti-competitive conducts 1.578*** (0.375) 1.493*** (0.419) 1.974*** (0.544) 1.572*** (0.388) 1.620*** (0.357) 1.687*** (0.367) Repeated investigation -1.446** (0.574) -1.520*** (0.589) -1.138* (0.662) -1.295** (0.590) -1.295** (0.589) -1.323** (0.589) Dummy 1980 0.320 (0.380) Dummy 1990 -1.005* (0.523) ROCE 0.359* (0.217) 0.479** (0.230) 0.075 (0.278) Monopoly pricing -0.706** (0.349) -1.251*** (0.428) ROCE x Monopoly pricing 1.146** (0.479)