Research Spotlight
Yang-Ming Chang
Recent research projects by Yang-Ming Chang, professor of economics, include an examination
of differences between the U.S. antitrust case and the E.U. antitrust case against
Microsoft. In 2000, the U.S. Department of Justice called for Microsoft’s breakup
for reasons that included the following: it monopolized the market for the operating
systems; the integration of its browser, Internet Explorer(IE), into the Windows operating
system was anti-competitive; its free distribution of IE was predatory; it engaged
in anti-competitive contracts with personal computer manufactures and internet service
providers; it impeded product innovation; and its competitive actions harmed consumers.
But the U.S. government’s antitrust litigation against Microsoft was eventually overturned.
In the E.U. Microsoft case, the European Community argued that Microsoft had abused market dominance in
its operating systems by tying the sales of Windows Media Player or IE to Windows.
Unlike the U.S. case, the E.U. was successful in ruling against Microsoft and the company was required
to offer a clean version of Windows (without any browser or application software).
Yang-Ming and his coauthor, Hung-Yi Chen, a Ph.D. in economics from Kansas State and
currently a full professor at Soochow University, develop an economic model to capture
the idiosyncratic characteristics of the operating system monopoly (i.e., Windows
dominance) and of the oligopolistic market for browsers (IE, Netscape’s Navigator,
or Opera). They examine the case of tying behavior in which Microsoft integrates
IE into Windows to generate a bundled system good for sales, as compared to the no-tying
case when Microsoft is required by the government to break into smaller entities.
Their findings indicate that Microsoft’s tying enhances price competition in the browser
market and the integration of IE with Windows as a system good is socially desirable.
This is directly related to the fact that Windows is an essential component and the
fact that it is run on more than ninety percents of all personal computers. Based
on their model, they show that a Microsoft breakup stifles competition, hurts consumers,
and is socially undesirable. The results of their study further indicate that the
E.U. international antitrust intervention against Microsoft as a foreign exporter
benefits the E.U. software producers at the expense of their computer users. The
paper also addresses issues on international antitrust and protection of domestic
industries in the E.U. case. Yang-Ming presented this paper on March 17, 2012, at the
10th Annual International Industrial Organization Conference, which was held at George Mason University in Arlington, Virginia.
Lance Bachmeier
It is widely believed that higher oil prices lead to inflation. Based on the experience of the 1970's and 1980's, most introductory macroeconomics textbooks teach students that a higher price of oil increases the cost of producing goods, which is then passed on to consumers in the form of higher prices. Research by Lance Bachmeier, associate professor of economics, and Inkyung Cha, visiting assistant professor of economics, has shown that is not the case. They examined the behavior of more than 100 "core" consumption goods, such as clothing, toys, and household appliances, and found that most prices either do not change or even fall when the price of oil rises. They find that the main reason oil shocks are no longer inflationary is that firms have adopted energy-efficient production technology. Firms use about half the energy to produce the same goods today as in 1970. Their paper was published in the September 2011 issue of the Journal of Money, Credit and Banking.
Tracy Turner
Recent research by Tracy Turner, associate professor of economics, finds that, despite
its hefty price to the U.S. Treasury of roughly $100 billion per year, the mortgage
interest deduction (MID) is an ineffectual policy for boosting homeownership attainment
and in some cities has an adverse effect. Her research, joint with Christian Hilber
at the London School of Economics, examines the impact of the combined state and federal
MID on homeownership decisions according to local housing conditions and household
income status. Their findings indicate that the MID only boosts the homeownership
attainment of higher income households in less tightly regulated housing markets.
In cities where the housing stock cannot readily adjust to demand pressures, an increase
in the MID actually reduces the likelihood of homeownership. This perverse effect
occurs, the authors hypothesize, because when the value of the tax subsidy is capitalized
into house prices, a large segment of the market for owner-occupied housing may be
priced out and existing owners and renters still on the market to purchase buy bigger
houses. Professor Turner has been invited to present this research at numerous venues,
including the "Mortgage Foreclosures and the Future of Housing Finance," 2010 Research
Symposium hosted by the Federal Deposit Insurance Corporation and Federal Reserve
Bank in Arlington, VA, and the "Housing and Taxation" session at the 2011 National
Tax Association Meetings. The findings of this project have also been cited by several
news outlets, including the Wall Street Journal, The Washington Post, The London Financial
Times, and The Brookings Institution and in testimony before the U.S. Senate Budget
Committee.