Hong And Plott Case Study

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Hong and Plott (1982) was one of the first papers studying a concrete policy problem. Several rate publication policies had been proposed in the late 1970s for the transportation of dry bulk commodities on US inland waters. Among the policies considered was the requirement that a carrier must file a proposed rate change with the Interstate Commerce Commission at least 15 days before the rate change becomes effective.

Hong and Plott (1982) ran laboratory markets with, and without, the advanced notice requirement. They concluded that, in the laboratory markets, the rate file policies cause higher prices, lower trade volume, and reduced efficiency. The specific contribution of this experiment arises from the fact that the consequences of the
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Interestingly, Grether and Plott (1984) could not confirm the additivity of individual practices. Public price announcements alone have an insignificant positive effect on prices but the most favored nation clause alone seems to cause slightly lower prices. They conclude from this that measurement of the effects of the practices with industry data might encounter difficulties.

Regarding the relevance of the experimental study to the ethyl case, Grether and Plott (1984) note that even experimentation with the industry itself would not indicate with certainty whether the practices caused higher prices. The industry is so complex that the inherently dynamic changes would make a definite conclusion difficult. For the controlled experimental environment, the claim made during the ethyl case litigation that the practices had no effect at all was clearly rejected.
2.3 The Antitrust Logit Model (ALM)

Davis (2002) and Davis and Wilson (2005) come up with an interesting shift in focus for policy relevant experiments. They do not analyze a concrete policy decision or a specific antitrust case but rather a policy
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Decisions had to be unanimous. If the committee failed to reach a decision, the allocation would be decided by the Federal Aviation Administration (FAA) as a default. Behavior of airline representatives in the committee therefore depended on the default option. The FAA had not decided which default to use but Grether et al. (1981) consider four options: (i) a lottery, (ii) an auction, (iii) grandfathering of slots, and (iv) an administrative process. In addition to attending four committee meetings, they ran laboratory

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