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On August 5, 2024, U.S. District Court Judge Amit Mehta ruled that Google was in violation of the Sherman Act, Section 2 for monopolizing the search engine market via a multibillion dollar yearly payment in return for exclusive assignment on Apple device operating systems.    The magnitude of the payment -- $20 Billion in 2023 -- surprised most followers of the case. However, the actual basis of Google’s payment was an ad revenue sharing percentage, which we have estimated to be 36%. Compared to the 30% in-app revenue sharing percentage Apple charges developers for a 1 in 380,000 video game shared position in the Apple Store, the Google payment for an exclusive search engine position does not seem excessive.   In searching for a remedy that is not overreaching, case law suggests that a judge start by asking a “but-for” question: But for this $20 Billion payment exclusive deal between Google and Apple, how can a search engine market be structured to be competitive?   The purpose of this paper is to suggest a market design remedy. This is opposed to remedies involving divestiture of the Chrome browser or elimination of all payments to Apple. The market design remedy mandates that Apple conduct an annual combinatorial auction for positions on a search engine choice screen. For the first few years, the remedy should require Google to maintain its 36% revenue share percentage.  The one hard structural choice is that the auction never include an exclusive position, given decades for Google to develop its current technical superiority in both search and AdTech without much competition.   In the first year, invite Microsoft, Mozilla, and others to bid the same 30% revenue sharing percent as the Apple Store.  Possibly, create new niche positions for AI search buttons.  Give Apple discretion to choose among bidders willing to bid  30% revenue sharing for a position on the basis of potential to execute.  Mandate Apple give new entrants multi-year terms, but allow Apple to include a liquidated damage clause, approved by an outside arbitrator,  to facilitate efficient breach due to poor performance. ​ Review all contracts after the courts rule on pending antitrust cases involving Google's AdTech

Click to Download https://c1c0481a-8d34-49dc-ad66-d6c488c905a9.usrfiles.com/ugd/c1c048_4a534d25b4d243cfb043c5ea37e3b11f.pdf In a crypto-economic trading platform: ● "The network becomes the exchange" ● Snapchat (ephemeral) bid-asks ● User-defined smart contracts The order book is a market design for the exchange of goods and assets. It dates back to the European coffee houses of the late 1600s. In London, Jonathan's Coffee House was a significant meeting place for traders in London in the 1700s. It later became the site of the first London Stock Exchange. In the late 1700s, in what later became known as New York City, Dutch traders met at a Buttonwood tree in lower Manhattan island to buy and sell goods. Now known as Wall Street, this location became the center of financial asset exchange in the United States. Until the 1970s, stock exchanges were characterized by a market design involving traders gathering around pits with specialists manually matching bids and asks in paper order books The great financial economist Fisher Black wrote a prophetic article in 1971 called "Toward A Fully Automatic Stock Exchange" where he laid out the implications of the coming automation of the manual order book. He speculated on what the computerization of the order book would mean for bidding mechanisms, liquidity and overall stock market efficiency.

Download full paper click here The Federal Trade Commission (FTC) has recently filed an administrative complaint against the Big 3 pharmacy benefit managers (PBMs) claiming they engaged in unfair conduct in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. They never used the word "collusion" in the complaint and chose not to sue under The Sherman Act, Section 1.  We view this as a novel case of market design collusion rather than a case of price collusion. The Big 3 PBMs are conceptualized as auctioneers soliciting rebate bids off list prices in exchange for favored positions on formularies.  We will show how the fairness standard of the FTC Act can be made operational by judging fairness against economic theories of good auction design.  Discovery is focused on finding explicit communication among the Big 3 PBMs in 2012 to change the so-called “winner’s determination equation” of this auction, adding high gross rebates as a basis for formulary position assignments. On the other hand, we will argue that a case based on a bevy of anecdotes comparing only net unit prices will fail due to complexities in the winner’s determination equation.

About the author: Lawrence W. Abrams I have a B.A. in Economics from Amherst College and a Ph.D. in Economics from Washington University in St. Louis. Emails welcome: labrams@gmail.com ​ In 2002, I started looking at the 10-Qs and 10-Ks of the drug store chains and pharmacy benefit managers after an "aha moment" in a Mountain View CA. Longs Drug store (later bought out by CVS). I had gone there to to pick-up my renewal Rx of Type 2 diabetes drug Glucophage. Several things happened that night piqued my interest in PBMs and big drug store chains. First, I found out my Rx for Glucophage was now an Rx for Metformin without my prior knowledge. I asked the pharmacist what was going on. He mentioned that my Rx now had a cheaper generic available and my drug benefit plan manager made the switch automatically. That night I was also struck by the fact that here was a 12,000 square feet store and all the customers were lined up at the pharmacy counter in the back. I asked myself, "Could it be that hole in the wall in the back generated all the profits while the front store was just a relic of the bygone days of lunch counters and shopping on Main Street? The question of relative source of pre-tax profits -- pharmacy vs front store -- piqued my interest all the more as I compared the pathetic merchandising I saw in this big drug store chain versus the amazing health product merchandising I saw a week earlier at the first Whole Foods store on the West Coast in downtown Palo Alto, CA. Based on that "aha moment", I wrote the following three papers in 2002 and 2003 and created an early Wordpress website and made them accessible via .pdfs for free: Nu-Retail: A Counter to the Web- 2002 The Next Tom's of Maine - 2002 Walgreen's Transparency Issue - November 2003 In addition, I was an early adopter of PBM as acronym for pharmacy benefit managers and I published the first publicly available papers to quantify the PBM business model and retained rebates: ​ Quantifying Medco's Business Model - April 2005 Estimating the Rebate-Retention Rate of Pharmacy Benefit Managers - April 2003