Research and analysis

Strategy: Economic research

Published 8 March 2023

© Crown copyright 2023

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Purpose of the research strategy

The Competition and Markets Authority (CMA)’s purpose is to help people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour. Ongoing research means that the state of knowledge on competition, innovation and consumer welfare is constantly evolving. This strategy sets out:

  • why it is essential that the CMA should engage in economic research

  • what areas of research are of particular interest in the medium term

  • how the CMA will initiate, conduct, and disseminate research to ensure maximum benefit to the organisation, wider government, and the public

The CMA has established a new Microeconomics Unit, based at the Darlington Economic Campus, to lead and expand its economic research function. The creation of a new, separate unit demonstrates the CMA’s and the government’s belief in the importance of independent, open-access, collaborative research in informing evidence-based policy.

This research strategy covers the CMA’s novel, explorative analysis to be published externally and aimed at contributing to the academic, policy and public debate of open issues related to competition and productivity. Regular CMA analysis underpinning casework, such as market research and market studies, continue to be governed by existing governance structures and principles. Likewise, other parts of the CMA might also carry out economic research to inform their work, outside of this strategy.

The CMA’s economic research also sits alongside existing data science and behavioural research functions housed in our Data, Technology and Analytics (DaTA) Unit. The Microeconomics Unit and the DaTA Unit are separate units with separate research interests and strategies but will cooperate closely on any issues of mutual interest (for instance, the economics of data).

The Office for the Internal Market similarly conducts economic research on the effectiveness of the operation of the UK’s internal market and the Microeconomics Unit and the OIM will cooperate closely on matters relating to the competition aspects of this work.

The CMA has published this economic research strategy to ensure transparency about our research interests, practices, and outputs, and to enable stakeholders and potential collaborators to understand how best to work with us and how to access CMA research outputs.

Setting out this research strategy puts the CMA in line with many similar institutions in the United Kingdom (such as the Bank of England, the Financial Conduct Authority, and the Office for National Statistics) and abroad (such as the Organisation for Economic Cooperation and Development, the US Federal Trade Commission, the EU Directorate General for Competition, and the US Federal Reserve system) with similar principles to guide their research activities.

The CMA Microeconomics Unit can be contacted at MicroeconomicsUnit@cma.gov.uk

Why do research at the CMA?

There are 3 reasons to do economic research in the CMA. First, competition, innovation and productivity are vitally important to the work of the CMA and wider government, and critical to UK economic growth. Therefore, the CMA has established the Microeconomics Unit to provide economic expertise on these issues.[footnote 1]

Second, economic research ensures that the CMA is abreast of emerging issues in industrial economics and is as effective as possible in helping people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour. For instance, issues of common ownership, labour market monopsony, killer acquisitions and the link between market concentration and political lobbying are active areas of academic debate and could have significant implications for the types of cases the CMA pursues, and how it builds a theory of harm.

An active research function improves the analysis conducted in the core casework of the CMA by exposing colleagues throughout the organisation to cutting-edge thinking and methods, attracting high-quality staff and providing the organisation with a deep pool of knowledge to draw on as required in particular cases. It also enables us to access resources and funding outside the organisation, allowing the CMA to provide better value for public money.

Third, an active economic research function allows the CMA to engage in the wider regulatory debate and to influence competition policy in the UK and globally. By anticipating emerging competition issues and leading innovative thinking on remedies, the CMA can leverage its resources to play an outsized role in global competition economics.

Research to date

The CMA already has a small economic research function, to date conducted within the Office of the Chief Economic Advisor. This includes:

These regular outputs will continue to be part of the CMA’s published work. The State of UK Competition report in particular has already proved to be an important part of the public debate, and we aim to build on it.

However, the ambition set out in this document is to collaborate with partners across government and the wider research community to deliver a broad, consistent, and high-quality stream of relevant research to support the competition and other work of the CMA and wider government work on topics around investment, innovation, competition, and productivity.

Areas of research interest, 2023 to 2025

This research strategy aims to cover issues in competition, investment, innovation and productivity. In consultation with stakeholders across government and independent experts, the CMA has identified a series of high-level topics of interest to guide staff research and external collaborations.

Within these areas of interest, the CMA supports the development of new methods and data, theoretical contributions and empirical, econometric work that provides new causal estimates on open questions within the broader remit of the CMA.

These areas of research interest aim to guide work of CMA staff and to inform potential collaborators. Progress towards these priorities will depend on available resources and emerging areas of policy interest. The CMA will review and revise its areas of interest regularly to ensure its economic research function still serves the goals outlined in this strategy.

Each area of interest contains a list of recent papers relevant to the research interests of the CMA. The list is indicative only and does not mean to provide a full review of the literature on the topic. A paper citation should not be taken as an endorsement of its conclusions by the CMA.

Innovation, investment, and productivity

The UK productivity puzzle in recent decades is well documented, as is the degree to which investment and innovation activity has fallen since at least 2008. The causes behind these trends are however less well understood. Relevant research topics include:

  • improved measurement of innovation inputs, outputs, and outcomes beyond patents

  • theoretical and empirical research on the link between competition and productivity

  • research on the drivers of investment (especially in intangibles), including market structure

Recent articles of interest in this area include:

Understanding markets and market power in the aggregate

A primary aim of the new CMA Microeconomics Unit and this research strategy is to better understand the causes and consequences of market power in the economy as a whole. This requires better data on market and substitution patterns, and a better understanding of the relationship between market structure, technological fundamentals, and market power. Relevant research topics include:

  • new data or methods to measure markets and substitution patterns

  • improved data or methods for production function estimation

  • research on drivers of economy-wide trends in market power

Recent articles of interest in this area include:

Data, platforms and digital markets

Digital markets and platforms sit at the heart of the modern intangible-heavy service economy. Data has the potential to drive both consumer-serving innovation and to entrench market incumbents. Competition authorities are grappling with the implications of these competing forces for policy. Relevant research topics include:

  • implications of platform structure and contractual arrangements for welfare

  • theoretical and empirical research into digital platform ecosystems

  • the economics of privacy regulation and the value of data for firms and consumers

Recent articles of interest in this area include:

Supply chains, monopsony and labour markets

Traditionally, competition authorities have focused on horizontal product market competition. Market structure may also influence supply chains, including their resilience in the face of unanticipated shocks. Market power may also take the form of monopsony in labour or other input markets, distorting employment and investment choices and harming consumers welfare. Relevant research topics include:

  • supply chain structure, monopsony power in input markets and resilience to shocks

  • measuring labour markets, measuring search frictions, and estimating labour market power

  • theoretical and empirical research on the role of labour unions and other institutions

Recent articles of interest in this area include:

Non-market effects of market power

Market power may interact with other market failures in ways that are hard to predict. Decarbonisation for instance is a key topic for economic policy, and 1 potentially fraught with market failures. The CMA is keen to explore if and how competition policy and regulation might play a beneficial role in the structural transformation towards Net Zero, alongside other policies.

Similarly, market power may affect externalities on consumers in markets with addictive goods, insurance markets with pooling and separating equilibria and where companies attempt to translate market power into political influence via lobbying. Relevant research topics include:

  • research on regulatory policies in support of decarbonisation

  • optimal pricing and advertising of addictive goods or with habit formation

  • corporate behaviour with non-market influence, for instance through lobbying

Recent articles of interest in this area include:

Corporate ownership and firm organisation

Corporate ownership structures and the organisation of the firm are active areas of research both in antitrust economics and for wider productivity concerns. Within competition economics, common ownership and vertical mergers have received increasing attention. More widely, managerial incentives, organisational practices and the boundaries of the firm may be behind major trends for productivity, wages, and investment. Relevant research topics include:

  • the importance and impact of common ownership and interlocking directorates

  • efficiency and anticompetitive explanations of vertical mergers

  • outsourcing, organisational practices and within versus between-firm wage inequality

Recent articles of interest in this area include:

Evaluating competition policy

A large and growing literature evaluates individual mergers ex post, but less is known about the ex-ante desirability of specific antitrust rules or competition policies. These practical rules are not always rigorously founded in scholarly work. Even less is known about the desirability of entire competition regimes over many cases, yet this question is crucial for competition authorities. Relevant research topics include:

  • theoretical and empirical work on merger decision rules, including deterrence effects

  • empirical cross-country comparisons of competition regimes

  • theoretical and empirical research into novel issues arising from competition casework

Recent articles of interest in this area include:

Research governance

CMA research principles

All CMA researchers need to aware of, and abide by, legal, ethical and confidentiality standards when conducting research. The Government Analysis Function, which includes economists at the CMA, has signed up to the Concordat to Support Research Integrity and is committed to upholding rigour and integrity in all aspects of its research.

Initiating research projects

The economic research function of the CMA sits in the newly created Microeconomics Unit. Research at the CMA will be informed by the needs of our stakeholders in competition enforcement, wider government, and the public. Economic research projects can be initiated at any level of the organisation, with governance proportional to the scale of the work. The leadership of the Microeconomics Unit will provide a steer on prioritisation where necessary.

Collaborations and funding

The CMA recognises that collaborations and partnerships with academics, research institutes, data providers, regulators (including competition authorities worldwide) and other government departments are crucial for successful research.

Collaboration may take many forms. The CMA will explore formal and informal collaborations with academics, postgraduate students and researchers at other competition regulators and policy research institutions. These might include secondments, sponsored studentships, joint grant applications and more informal knowledge-sharing arrangements. The CMA also views favourably joint work between CMA employees and outside collaborators on research projects where interests overlap, and skills are complementary.

The CMA will use its wider academic engagement activities (seminars, workshops, and conference participation) to build links in line with the research strategy and the topics outlined in the research priorities.

Finally, the CMA aims to become an accredited public sector research establishment (PRE). Like current PREs (such as the UK Health Safety Agency, the Office for National Statistics and the Defence Science and Technology Laboratory), the CMA will need to show evidence of research capabilities and complete accreditation. Obtaining accreditation will allow the CMA to access research funding directly and underscore the ambition to become a government-wide centre of expertise on competition, innovation, and productivity.

The academic advisory panel

Over the past few years, the Competition and Market Authority academic advisory panel has fulfilled many functions. It has acted as a sounding board for the CMA, provided advanced training and (in previous years) technical expertise on specific cases. With the establishment of the new Microeconomics Unit and the publication of this research strategy, administration of the academic advisory panel will move closer to the CMA economic research function.

An expanded panel with expertise aligned with the CMA topics of research interest will be established to interact regularly with CMA researchers and provide feedback and advice on research projects undertaken at the CMA, which could also include wider CMA research work. Where of mutual interest, academic advisors may collaborate with the CMA on joint research projects.

Dissemination

Research needs to reach the right audiences to have the most impact. It also needs to be able to challenge existing views and posit and test hypotheses in an evolving data and knowledge landscape. The policies the CMA establishes around dissemination need to make sure CMA research can do that in a way that builds public trust.

In line with similar policy institutions, the CMA will draw clear distinctions between 3 different types of research output:

  • outputs that represent the institutional view of the CMA and feature CMA branding

  • outputs produced by CMA staff as part of their work time that do not represent the settled view of the organisation

  • outputs produced by CMA staff in their own time without the use of CMA resources.

Outputs representing the institutional view of the CMA need not carry a disclaimer. Staff outputs or outputs produced by staff in their own time however need to make clear the distinction between the author’s views and those of the organisation.

Regardless of the type of output, CMA research will follow best practices in disseminating research in a way that increases public trust. Where possible, methods and data will be shared with others, and research outputs should be openly accessible to all users.

CMA research staff will work with colleagues across the organisation to make sure research findings reach all interested stakeholders and the wider public through appropriate means for maximum impact. This might include a blog post, social media outreach, presentations, or a policy paper in addition to a technical working paper or peer-reviewed journal submission. The CMA recognises that the value of its research comes primarily from an ability to improve policymaking in the UK on issues of competition, innovation, and productivity.

Intellectual property and open access

The UK government and UKRI have committed to full and immediate open-access publication of peer-reviewed research funded by public or private grants. The CMA aims to adhere to these standards as soon and as fully as is feasible.

In line with government best practice, the default copyright for CMA research should be Open Government Licence (OGL). This should be specified when submitting research to peer-reviewed journals, and suitable disclaimers should be added to pre-prints and working papers.

Evaluation

To ensure public resources funding research are spent effectively, the CMA will collect and evaluate quantitative and qualitative evidence on the impact of its research. The CMA recognises that the primary impact of its research should come from improvements in the evidence base for policy on issues of competition, innovation, and growth.

Evaluation and monitoring activities will be proportionate to the amount of resource expended and the expected impact of the project. Evaluations will not only inform individual research projects, but also future versions of the CMA research strategy and topics of research interest.

  1. The Penrose report recommended that the CMA should become “a microeconomic sibling for the Bank of England’s well established public macroeconomic role”. (Penrose, 2021, p.15) https://www.gov.uk/government/publications/power-to-the-people-independent-report-on-competition-policy ↩

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