M2 Choice – Economics of Markets and Organizations (EMO)

Meet_the_board_ArthurCurrent student – Arthur Biamouret

Which aspects of your chosen program were the most challenging?

The M2 EMO is not technically or theoretically difficult, but I think that the hardest part for me was to do theory. After my gap year – two internships and a trip – I was expecting to do applied economics, but the M2 EMO is still quite theoretical. Obviously, we do not learn this for fun, we need it in our future jobs and it was very useful for interviews. But still, you need to be ready to go through some Cournot, Bertrand and Hotelling models for one more year. Fortunately, most of it was not difficult, and was interesting and well supported by very good applied papers.

Which was your favourite course(s) and why? 

My favorite course was Empirical Analysis of Firm Behavior. The teacher (Mathias Reynaert) is very good and the course is focused on applied methodologies. We had two homeworks to do, which allowed us to practice STATA and to apply the economic theory seen during the previous years. During this class, we discussed interesting topics using applied papers and real life examples. Moreover, the class was a good complement to another one which was more theoretical.

What do you plan to do next?

After the M2 EMO, I would like to work as a consultant in competition economics. I have always been interested in competition issues since we, as consumers, can feel the consequences of those decisions in our daily lives (telecommunication, retail, transports, etc). I have always wanted to be at the heart of those decisions which often strongly impact people’s environment. Moreover, competition issues are present in every sector, and working as a consultant will give me the opportunity to discover diverse topics and methodologies. For the next six months I am going to Brussels in order to do my internship with the firm Positive Competition.

M2EMO_AlumniAlumni – August Aubach Altès

What are you up to now?

I am an economic consultant at Analysis Group in Paris. The vast majority of our cases concern French and European competition matters. My primary job is to integrate industrial organisation theory and econometrics, along with current quantitative methods, to analyse the conduct and market dynamics at issue in antitrust litigation and merger investigations. At present, I am involved in an important case that involves competition in digital media markets.

I started as an intern in June 2019 and then received an offer as a full-time Analyst in December. One of the main reasons I decided to stay at Analysis Group is that the firm offers the right balance between academia and the real world. The work allows me to deepen my understanding of market structures and firms’ strategic choices, from both a theoretical and an empirical perspective. The work environment at Analysis Group promotes cooperation and knowledge sharing. I am currently working with and learning from experts in industrial organisation. I would like to pursue a Ph.D. in economics, with a specialisation in industrial organisation, and I believe that this experience will undoubtedly help me shape my future research.

What skills acquired from TSE do you find useful in your work?

TSE gave me a comparative advantage over other graduate students with similar profiles. Courses at TSE provide the skill set that is required for any job. As one might expect, hard skills such as economic reasoning, data analysis, computer programing and writing abilities are essential in all types of consulting work. However, the above-mentioned is a necessary, but not sufficient, condition to stand out, and it is the set of soft skills that I learned at TSE – such as time management, teamwork and flexibility – that are crucial. These skills have proven particularly useful, as most of the work is done in teams – that is, working regularly with people who have different backgrounds and work styles.

Regarding the EMO track, it has positioned me ideally for this role by giving me the opportunity to analyse in class many competition cases from a variety of standpoints. The opportunity to engage with these cases – such as horizontal mergers, exclusionary contracts and collusive behaviours in two-sided markets – allowed me to understand how economic agents should be understood depending on their incentives and on the configuration of the market. Therefore, one of the main takeaways from the EMO master that I have implemented at Analysis Group is that each case should be analysed from a rigorous and critical economic perspective, and as an independent and unique event.

Should we use new economic methods to assess the impact of collusion on welfare in vertical markets? The example of the “Yoghurt case”


Céline Bonnet is a director of research at INRAE within TSE


If literature has widely covered collusion in horizontal markets, it has not given enough attention to collusion in vertical markets, and more precisely on how to properly evaluate the impact of cartels on total welfare. As we observe convictions for collusion among prominent manufacturers, economists try to advise authorities on new approaches to better consider the strategies of retailers, and better assess the impact of collusion on both manufacturers and retailers, as well as on consumers.




A concentrated market which has become the scene of anti-competitive practices

Over the past 30 years in France, the retail sector has known successive mergers that strengthened the bargaining power of big retailers against manufacturers. The food retail sector, for example, is dominated by eight major groups, including Carrefour and Leclerc, who represent about 40% of the total sales. To counteract this concentration trend, manufacturers of the food industry also decided to engage in a consolidation movement in the early 2000s. The increase of concentration among both retailers and manufacturers has led to higher prices for consumers.

Despite that trend, retailers have still searched for new innovative strategies to differentiate themselves and be more competitive on the market. Big retailers have played the strategy of Private Labels – PLs: they sell store-owned brands, such as, for example, la Marque Repère in Leclerc. PLs are then sold along with National Brands – NBs, established manufacturer brands – giving retailers advantages on both horizontal and vertical markets. They can differentiate from other retailers who might sell the same NBs, and they gain bargaining power against NBs manufacturers, which will lose market shares for the benefit of PLs manufacturers if they charge too high prices. Indeed, PLs products can be substitutes for NBs products, and are often sold at a relatively low price.

The concentration of manufacturers, along with increasing selling prices, also facilitated collusion and other anti-competitive practices. This can be illustrated by the “yoghurt case.

In 2015, French authorities charged 10 major PLs producers of the French dairy desserts sector – such as Yoplait and Lactalis – for having colluded from 2006 to 2012. Indeed, even though PLs are retailer-owned brands, one PL manufacturer may produce for several retailers at the same time. This gives PLs producers incentives to collude. If the price proposed by the retailer is too low, they can reduce their market share in the concerned retailer’s store and sell somewhere else. Retailers will suffer from this strategy, as they need PLs products to differentiate and bargain. Hence, the bargaining power of PLs producers increases with collusion.


A traditional estimation method of collusion effects has become outdated

To assess the variation in welfare caused by the collusion, the French competition authorities used a traditional economic approach, consisting in mainly focusing on the horizontal collusion, and fixing the retailers’ response. The flaw of this method is that it does not take into account vertical relations between PLs producers and retailers, and hence neglects the strategic response of the retailers. It also ignores the potential  “umbrella effect”, which arises when an increase in PLs products’ wholesale prices diverts demand to the substitute product (NBs) and thus distort NBs products’ wholesale prices and market share. A forthcoming paper  (C. Bonnet, Z. Bouamra-Mechemache, Empirical methodology for the evaluation of collusive behaviour in vertically-related markets: an application to the “yogurt cartel” in France) addresses this issue and applies this new methodology to the “Yoghurt case.


A new economic initiative to assess the impact of a cartel on welfare applied to the “Yoghurt case

The idea is to model a competitive setting – or non-collusive counterfactual – to obtain the prices and quantities that would have been observed in such environment, and then compare it with the prices and quantities we currently observe on the market. This new method differs from the traditional one in the sense that the negotiation of the choice of the wholesale prices is modelled as a Nash bargaining game, and not as a unilateral decision from the manufacturers that retailers have to accept. The results from this paper concluded that there was profitable collusion among PLs manufacturers. It also showed that the profit variation for retailers was quite ambiguous, and that PLs producers were not necessarily the only winners of the cartel.

Faculty article

In the competitive setting, by decreasing the wholesale price of PLs products, we would expect that the market share – and hence the wholesale and retail prices – of NBs products would decrease due to a drop in NBs demand. Indeed, in the yoghurt market, we observe an asymmetric substitution between the two types of products: NBs products are more sensitive to a change in the prices of PLs products than the other way around. Strangely, the simulation showed a decrease in market share and wholesale prices for NBs products, but not a decrease in retail prices. In fact, the « umbrella effect » causes a decrease in wholesale prices of NBs products following the decrease in the wholesale prices of PLs products. NBs and PLs manufacturers clearly lose profit in the competitive setting compared to collusion. The novelty then is to take into account the optimal strategy of the retailer, which is actually to slightly increase the retail price of the NBs products: clients will be attracted by the low prices of PLs products, and the retailers will extract a maximum of surplus from consumers who still want to buy NBs products. The retailer actually gains from PLs products but loses from the increase in NBs products’ prices because of the asymmetric substitution. The overall result varies from one retailer to another: for some, the negative effect of NBs products exceeds the positive effect of PLs products, but not for others.

Hence, both PLs and NBs manufacturers are better off with collusion, while the results for retailers are mitigated. The study also found that consumers are worse off with collusion, but the loss is relatively low – less than 1% of the consumer surplus. Overall, total welfare has increased on the yoghurt market.


The “yoghurt case” is an example of how variations in welfare can be wrongly estimated when not taking into account all the strategies of all players of the game. With this new methodology, consisting in considering both inter and intra brand competition, as well as a supply model that includes vertical linkages between manufacturers and producers, competition authorities can better evaluate profit sharing between providers and sellers. In the “yoghurt case”, having more precise information on the providers of each seller would have allowed to estimate the exact impact of collusion on each provider.


By Céline Bonnet