Last Wednesday, the Wisconsin Supreme Court heard oral argument on whether to reinstate an antitrust lawsuit against taverns around the University of Wisconsin (story here). In 2002, the taverns agreed to eliminate drink specials after 8:00 PM on Fridays and Saturdays. A group of students filed a class action lawsuit against the taverns for injunctive relief and damages, claiming that the agreement constituted an illegal conspiracy in restraint of trade.

Read the full piece here. 

Abstract

Building on the success of prediction markets at forecasting political elections and other matters of public interest, firms have made increasing use of prediction markets to help make business decisions. This Article explores the implications of prediction markets for corporate governance. Prediction markets can increase the flow of information, encourage truth telling by internal and external firm monitors, and create incentives for agents to act in the interest of their principals. The markets can thus serve as potentially efficient alternatives to other approaches to providing information, such as the Sarbanes-Oxley Act’s internal controls provisions. Prediction markets can also produce an avenue for insiders to profit on and thus reveal inside information while maintaining a level playing field in the market for a firm’s securities. This creates a harmless way around existing insider trading laws, undercutting the argument for the repeal of these laws. In addition, prediction markets can reduce agency costs by providing direct assessments of corporate policies, thus serving as an alternative or complement to shareholder voting as a means of disciplining corporate boards and managers. Prediction markets may thus be particularly useful for issues where agency costs are greatest, such as executive compensation. Deployment of these markets, whether voluntarily or perhaps someday as a result of legal mandates, could improve alignment between shareholders and managers on these issues better than other proposed reforms. These markets might also displace the business judgment rule because they can furnish contemporaneous and relatively objective benchmarks for courts to evaluate business decisions.

Here is Senator Obama’s economic advisor Austan Goolsbee on globalization and free trade (as described by George Will in his recent column)…

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Greg Mankiw and Tyler Cowen have started the speculation. Cowen prefers “Anne Krueger, Jagdish Bhagwati, and Gordon Tullock for their work on rent-seeking” but predicts a behavioral finance prize to Fama, Thaler & French or a prize for research on the principal-agent theory of the firm to Williamson and/or Tirole. Mankiw predicts Fama, Feldstein, or Barro based on some citation analysis. Thomson Scientific adds their own predictions here.

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I highly recommend co-blogger Thom’s paper (discussed in this post) for those interested in the current Section 2 debate over the appropriate standard for exclusionary conduct. While I tend to fall into the camp that views unilateral firm conduct as too diverse for a “holy grail” test to make sense, and therefore support different tests for different types of conduct, Thom’s paper does an excellent job of summarizing these tests and working through the potential implications of the Supreme Court’s Weyerhaeuser decision for each of them.

Read the full piece here.  

My colleague Tom Hazlett has a characteristically insightful essay in the Financial Times this week entitled “How the Walled Garden Promotes Innovation.” In response to critics that argue that “only a device that is optimised for any application and capable of accessing any network is efficient,” Hazlett offers Apple and DoCoMo as examples of how markets work best to respond to consumer preferences when “independent developers, content owners, hardware vendors and networks vie to discover preferred packages and pricing.”

Read the full piece here.

AAI continues its series of antitrust policy statements from presidential candidates with a submission from John Edwards. Again, I’m very pleased that the AAI was successful in getting this series of submissions together and inducing candidates to share their thoughts on antitrust policy. So what does Edwards have to say?

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I’ve just posted my latest antitrust article, Weyerhaeuser and the Search for Antitrust’s Holy Grail, to SSRN. Here’s the abstract…

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Along with my Lewis & Clark colleague, Joe Miller, I have organized a conference on the patent law doctrine of obviousness following the Supreme Court’s KSR case last term.  It’s a great line-up of participants, and should be an excellent conference.

Read the full piece here.