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Scholarship Abstract Harold Demsetz once claimed that ‘economics has no antitrust relevant theory of competition.’ Demsetz offered this provocative statement as an introduction to an economic . . .
Harold Demsetz once claimed that ‘economics has no antitrust relevant theory of competition.’ Demsetz offered this provocative statement as an introduction to an economic concept with critical implications for the antitrust enterprise: the multi-dimensional nature of competition. Competition does not take place upon a single margin, such as price competition, but several dimensions that are often inversely correlated such that a liability rule deterring one form of competition will result in more of another. This insight has important implications for the current policy debate concerning how to design antitrust liability standards for conduct involving both static product market competition and dynamic innovative activity. The primary purpose of this essay is to revisit Demsetz’s broader challenge to antitrust regulation in the context of the frequently discussed tradeoffs between innovation and price competition. I summarize recent developments in our knowledge of the relationship between competition and innovation, highlighting the deficiencies that significantly constrain antitrust enforcers’ abilities to confidently calculate inevitable welfare tradeoffs. I conclude by discussing policy implications that follow from these limitations.
TOTM Professor Birdthistle has a very thoughtful reply to my earlier post over at the Conglomerate on Jones v. Harris and behavioral economics. I thank Professor . . .
Professor Birdthistle has a very thoughtful reply to my earlier post over at the Conglomerate on Jones v. Harris and behavioral economics. I thank Professor Birdthistle for his reply. I’ve learned a great deal about Jones v. Harris from reading his posts at the Conglomerate and have no doubt that I’ll learn more from this exchange. The thrust of my original post was that, in general, my view was that behavioral law and economics has been too quick to rely on findings in the behavioral/ experimental literature demonstrating systematic deviations from rationality to justify paternalistic regulation.
Read the full piece here.
TOTM Much has been made about the importance of Jones v. Harris as a battle in the ongoing war between behavioral economics and rational choice/neoclassical framework . . .
Much has been made about the importance of Jones v. Harris as a battle in the ongoing war between behavioral economics and rational choice/neoclassical framework (see, e.g. the NYT). If the case if to be about the appropriate economic methodology or model for assessing legal questions, it is definitely an interesting turn to have Judge Easterbrook representing the rational choice economists while Judge Posner (who is simultaneously taking some flack for fast and loose and incorrect uses of macroeconomics) defends the behavioral view, considering that the latter wrote an important critique of the behavioral law and economics literature (here is an excellent summary of Posner’s opinion from Professor Birdthistle). Professor Ribstein frames the issue of Jones v. Harris and the New Paternalism nicely with a prediction…
Popular Media A big chunk of the fraudulent advertising (diet, exercise, work-at-home, credit repair) prosecuted by the FTC involves a testimonial advertisement that mentions a number, e.g., . . .
A big chunk of the fraudulent advertising (diet, exercise, work-at-home, credit repair) prosecuted by the FTC involves a testimonial advertisement that mentions a number, e.g., “I lost 74 pounds wearing slimming insoles.” Some consumers do not seem to understand that the results for the endorsers may not be typical, despite the disclaimer required by the FTC, “results not typical.”
TOTM University of Chicago economist (and behavioralist doyen) Richard Thaler thinks “the question of whether a ‘public option’ should be part of the health care solution” . . .
University of Chicago economist (and behavioralist doyen) Richard Thaler thinks “the question of whether a ‘public option’ should be part of the health care solution” is just “one big distraction.” In Sunday’s New York Times, Thaler argues that the debate over the public option is a “red herring” if, as President Obama insists, the public plan will have to break even and won’t be granted “the power to impose special deals with suppliers like hospitals and drug companies.” If those two conditions are satisfied, Thaler contends, the public plan is unlikely to have much success and certainly won’t drive out private insurers.
Popular Media I have great respect for my sociologically trained brethren and sistren (cistern?) but am not sure what, exactly, they are asking for. One sociologist thinks . . .
I have great respect for my sociologically trained brethren and sistren (cistern?) but am not sure what, exactly, they are asking for. One sociologist thinks economists downplay race and gender — “their supply and demand curves don’t deal with these questions” — which is silly, as much of the analysis of subprimes by labor economists focuses exactly on this. I’m not claiming that sociology (or anthropology or history or psychology) has no useful policy implications, of course, only asking for specifics.
TOTM In April 2008, the UK Competition Commission issued its Final Report culminating from its grocery sector inquiry. Along with supermarket concentration, the concern that emerges . . .
In April 2008, the UK Competition Commission issued its Final Report culminating from its grocery sector inquiry. Along with supermarket concentration, the concern that emerges out of that Report is that supermarkets will use their power to negotiate sharp deals with suppliers.
TOTM I’ve criticized the European Commission’s antitrust attack against Intel here and the resulting $1.44 billion fine. Now the EU is drawing fire for allegedly burying . . .
I’ve criticized the European Commission’s antitrust attack against Intel here and the resulting $1.44 billion fine. Now the EU is drawing fire for allegedly burying testimony, or at least failing to record it in a satisfactory manner, from Dell that it chose Intel’s chips not because of the coercive force of any of Intel’s rebates but because it preferred the performance of those chips over AMD’s product offerings. Part of the problem here is that the EU’s 542 page decision remains confidential and so it is impossible to tell what kind of impact this testimony would have on the issue of liability — and indeed the WSJ story sensibly suggests that there is little reason to believe that disclosure of this evidence would have changed the outcome. The WSJ story concludes by taking a swing at EU procedure…
TOTM I recently commented on Gordon Crovitz’s WSJ column on the Microsoft-Yahoo deal arguing that antitrust was simply too cumbersome to deal competition issues in dynamic . . .
I recently commented on Gordon Crovitz’s WSJ column on the Microsoft-Yahoo deal arguing that antitrust was simply too cumbersome to deal competition issues in dynamic markets like search. A short version of my take was that these concerns are often overstated in the areas of cartels and even sometimes in merger enforcement — but have their greatest bite in single firm conduct cases involving innovative markets where economic technology for detecting anticompetitive conduct is at its weakest and the stakes are highest. Randy Picker (Chicago) chimes in on the Crovitz piece with an interesting take and a call for even-handed application of claims that antitrust is obsolete…
