Industrial Organization: Antitrust
Prof. Jeffrey K. MacKie-Mason
Office Hours: Thurs 4-5:30
[email protected] / 764-7438
Link to Econ 632a: Empirical IO (http://www.econ.lsa.umich.edu/~jamesl/)
Link to IO
Goals: To understand the role of economics in competition policy and enforcement. To learn some economic theory applicable to antitrust issues. To learn to apply economic theory to the facts of real antitrust and merger cases.
Method: Each week we will study and discuss at least one major case. We will also read relevant economic literature. Class will proceed socratically: students will be asked questions about the economics relevant to the case, and will have to explain and defend their positions.
To prepare, students will write a 1-page (single-spaced) case outline each week. A case outline should include a summary of the facts, the issues presented, and the holding with a summary of the key arguments. It is hard to summary a case in a single page – part of the point of the exercise is to learn to find the most important (economic!) features of a case. You don’t have to (and won’t be able to) report on every issue in one page.
As a final assignment, students will prepare a detailed "expert report"
on a case of their choosing.
Starred (*) readings are required for class. Other readings will be useful for class, but many are provided as a bibliographic guide to the literature to aid your future research and other professional practice.
Readings marked with (R) will be on Reserve in Foster Library. Readings marked (J) should be available from JSTOR (http://www.jstor.org). Readings marked (W) are available on the Web from the indicated URL. Other readings are available from traditional library resources.
Useful Web Resources for Antitrust
*(W) US Dept. of Justice and Federal Trade Commission, "Horizontal Merger Guidelines", 1992 Revision, pp. 1-32 ("Introduction" and "Market Definition") http://www.usdoj.gov/atr/Guidelines/merger.txt (See also 1994 revision re: "efficiencies" at http://www.usdoj.gov/atr/Guidelines/sec4.htm)
*(J) Stocking, George and Willard F. Mueller, (1955) "The Cellophane Case and the New Competition", American Economic Review, 45: 29-63.
*Froeb, Luke and Gregory Werden, (1992) "The Reverse
Fallacy in Market Delineation", Review of Industrial Organization,
WEEKS 2 – 3: HORIZONTAL RELATIONS
*CASE: (W) Standard Oil Company of New Jersey v. United States, 221 U.S. 1 (1911). Supposed to be available at http://supct.law.cornell.edu/supct/cases/name.htm#Case_Name-S (but I couldn’t get to it when I tried one night).
*(R) Granitz, Elizabeth and Benjamin Klein, "Monopolization by ‘Raising Rivals’ Costs’: The Standard oil Case", (1996). Journal of Law and Economics 39: 1-47.
*(R) Krattenmaker, Thomas and Steve Salop, (1986). "Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power Over Price", Yale Law Journal 96(2): 209-93.
*(W) Economides, Nicholas, (1998). "The Incentive for Non-Price Discrimination by an Input Monopolist," International Journal of Industrial Organization (forthcoming). http://raven.stern.nyu.edu/networks/cepr486.pdf.
(R) Hovenkamp, Herbert, (1987). "Antitrust Policy, Restricted Distribution, and the Market for Exclusionary Rights," Minnesota Law Review 71(6): 1293-1318
(J) Salop, Steven C. and David T. Scheffman, (1983). "Raising Rivals’ Costs", AEA Papers and Proceedings, 73(2).
(J) Ordover, Janusz, Garth Saloner, and Steven C. Salop, (1990). "Equilibrium Vertical Foreclosure", American Economic Review, 80(1).
Brennan, Timothy J., (1988). "Understanding ‘Raising Rivals’ Costs’" The Antitrust Bulletin (Spring).
*CASE: United States v. Addyston Pipe & Steel Company et al., 85 Fed. 271 (6th Cir. 1898).
*Carlton, Dennis, Gustavo Bamberger, and R. Epstein. (1995). "Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?" RAND Journal of Economics. 131-147.
*(R) Netz, Janet. (1998) "Non-Profits and Price-Fixing: The Case of the Ivy League", Working Paper, Purdue University.
(R) Bamberger, Gustavo and Carlton, Dennis. (1997)
"Antitrust and Higher Education: MIT Financial Aid (1993)", forthcoming
in John Kwoka and Lawrence White, The Antitrust Revolution, 3rd
ed. (Oxford University Press: 1998).
WEEKS 4 – 6: VERTICAL RELATIONS
*CASE: U.S. v. Microsoft Corporation, Civil
Action 94-1564 (Dist. Court D.C.) (Internet Explorer case)
*(W) Economides, N. (1996). "The Economics of Networks". International Journal of Industrial Organization. October. Available from http://raven.stern.nyu.edu/networks/top.html.
*Katz, M. L. and Shapiro, C. (1994). "Systems Competition and Network Effects". Journal of Economic Perspectives. 8(2): 93-115.
*(W) Reback, G., Creighton, S., Killam, D., Nathanson, N., Saloner, G. et al. (1995). "White Paper: Technological, Economic and Legal Perspectives Regarding Microsoft's Business Strategy in Light of the Proposed Acquisition of Intuit, Inc." Upside. February 1, 1995. Available from http://www.upside.com/texis/mvm/story?id=34712c0e38
(W) Arthur, Brian (1990). "Positive Feedbacks in the Economy", Scientific American 80: 92-99. (http://roscoe.law.harvard.edu/courses/techseminar96/antitrust/references/econreferences/arthurarticle.html)
(W) Economides, N. and White, L. (1996). "One-Way Networks, Two-Way Networks, Compatibility, and Antitrust". Opening Networks to Competition: The Regulation and Pricing of Access. Edited by D. Gabel and D. Weiman. Amsterdam, Kluwer Academic Press. Available from http://raven.stern.nyu.edu/networks/93-14.pdf
Yale M. Braunstein and Lawrence J. White (1985). "Setting technical compatibility standards: An economic analysis", Antitrust Bulletin 30(2): 337-355.
(W) Mark A. Lemley and David McGowan (1998). "Legal Implications of Network Economic Effects", California Law Review 86 (May). Available from: http://papers.ssrn.com/sol3/paper.taf?abstract_id=32212
(R) Farrell, Joseph, Hunter K. Monroe, and Garth Saloner, (1994), "The Vertical Organization of Industry: Systems Competition versus Component Competition," mimeo.
(R) Kende, Michael (1994). "Profitability Under an Open versus a Closed System". Mimeo.
(W) Shapiro, "Antitrust in Network Industries," (1996). Speech before the American Law Institute and American Bar Association Conference, "Antitrust/Intellectual Property Claims in High Technology Markets", 25 January 1996. http://www.usdoj.gov/atr/speeches/shapir.mar
(W) Consumer Project on Technology: Microsoft
Antitrust Issues http://www.essential.org/antitrust/microsoft/microsoft.html
*CASE: Please answer the question: "Should the economic standards for an antitrust violation change for cases with strong network effects?" In your one-page memo, summarize the arguments for and against the proposition, and provide a summary of your own argument.
*(W) (R) Lemley, Mark, and David McGowan (1997).
"Legal Implications of Network Economic Effects," Draft working paper,
University of Texas Law School. Read esp. Sections I, II(A,B), and
III. Available from: http://papers.ssrn.com/paper.taf?ABSTRACT_ID=32212.
Also on reserve
*CASE: Jefferson Parish Hospital District No. 2 et al. v. Hyde, 466 U.S. 2 (1984). http://caselaw.findlaw.com/cgi-bin/getcase.pl?court=US&vol=466&invol=2
*Mathewson, F. and R. Winter, "Tying as a Response to Demand Uncertainty". The RAND Journal of Economics, Autumn 1997, 28(3): 566-583
*(J) Whinston, Michael D. (1990). "Tying, Foreclosure, and Exclusion", The American Economic Review 80(4): 837-859
(R) Bowman, Ward S. (1957). "Tying Arrangements and the Leverage Problem," Yale Law Review 67: 19-36.
(J) Burstein, Meyer L. (1960). "The Economics of Tie-In Sales", Review of Economics and Statistics 42: 68-73.
*CASE: Image Technical Services et al. v. Eastman
*(R) Shapiro, Carl. (1995). "Aftermarkets and Consumer Welfare: Making sense of Kodak", Antitrust Law Journal 63(2): 483-512.
(W) MacKie-Mason, Jeffrey and John Metzler (1998). "Links Between Vertically Related Markets: ITS v. Kodak", in The Antitrust Revolution, 3rd ed., J. Kwoka and L. White, eds. (forthcoming). http://www-personal.umich.edu/~jmm/papers.html#its
*Chen, Zhiqi and Thomas Ross (1993). "Refusal to Deal, Price Discrimination and Independent Service Organizations," Journal of Economics and Management Strategy, 2(4): 593-614.
(W) Bernheim, B. Douglas and Michael D. Whinston
(1996). "Exclusive Dealing", NBER Working Paper 5666 (July 1996). http://gray.nber.org/papers/W5666?module=bibliography&paper=W5666
WEEK 7: MERGERS
*(R) Werden, Gregory J. and Luke M. Froeb (1994). "The Effects of Mergers in Differentiated Product Industries: Logit Demand and Merger Policy", Journal of Law, Economics & Organization 10(2): 407-426.
(R) Werden, Gregory J., Luke M. Froeb, and Timothy
J. Tardiff (1996). "The Use of the Logit Model in Applied Industrial Organization",
Journal of the Economics of Business 3: 83-105.