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Journal of Competition Law and Economics Advance Access originally published online on November 15, 2007
Journal of Competition Law and Economics 2008 4(1):155-176; doi:10.1093/joclec/nhm027
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

MEASURING THE RATE OF RETURN FOR COMPETITION LAW

Paul A. Grout * and Anna Zalewska **

This paper focuses on the application and interpretation of measures of rate of return for competition law. Amongst other results, we analyse how outsourcing and similar arrangements impact the rate of profitability and show that the measurement is more volatile the greater the rate of profit (suggesting that the measures are most problematic when they are most needed). We identify and interpret the outsourcing arrangements that provide the lowest rate of profit and show that these arrangements have a close relationship to net present value. Finally, we provide suggestions to make profitability measures more informative for competition law.

* Centre for Market and Public Organization and Department of Economics, University of Bristol, U.K. E-mail: p.a.grout{at}bristol.ac.uk.

{dagger} School of Management, University of Bath, U.K. E-mail: a.zalewska{at}bath.ac.uk. We are indebted to Maarten Pieter Schinkel and a referee for helpful comments.


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