Substance and Process
November 15, 2006
Slide 2 Well-informed Analysis
- Both efficiency and anticompetitive effects/explanations are very possible
- On each side, analysis is subtle
- Efficiency: for example, investment-incentive theory
- Anticompetitive: for example, divide-and- conquer theory
Slide 3 Investment Incentives
- Segal/Whinston (Rand J. Econ. 2000)
- Relationship-specific investments are NOT an efficiency rationale for exclusivity
- Investments with spillover to customer-entrant deals MIGHT BE - it is very complex
- Who invests, how it spills over, bias absent ED
- How well could one disentangle this?
Slide 4 Divide-and-conquer exclusion
- RRW-SW (Amer. Econ. Rev. 1991/2000) shows that such exclusion can (profitably and harmfully) work against end users
- Usually exclusive dealing is with firms who then compete to sell to end users
- That can seriously affect buyer incentives
Slide 5 Divide-and-conquer
- Fumagalli and Motta (Amer. Econ. Rev.)
- Simpson and Wickelgren; Yong; Shaffer?
- Which is right and when?
- My attempted diagnosis and their reaction
- Presumably an intellectual resolution will emerge
- How likely is one to be able to prove?
Slide 6 Antitrust under Uncertainty
- (Bayesian thoughts)
- Role of presumptions and burdens of proof
- The two presumptions
Slide 7 Two presumptions
- Laissez-faire: don't intervene unless reasonably sure intervention will help
- Competition: protect "competition" unless reasonably sure alternative is better
Slide 8 "Competition"
- Have drifted towards making "competition" simply mean "the good outcome"
- Towards, not yet "to". Eyebrows, but not guffaws, at "pro-competitive monopoly"
- Law protects "competition," so tautologically that linguistic shift would be good if we knew all
- But di presumption in favor of competition then has no meaning!
- Merger between major rivals must be proven to be "loss of competition"? [Philadelphia Bank... ]
Slide 9 The shoe on the other foot
- What if "laissez-faire" were redefined as "the good outcome"?
- Explicating idea, not proposing policy
- Would redefine "intervention" as "bad intervention"
- Opponents of intervention would have to prove how it is bad
- Strict government rules would be "not necessarily intervention"
- Pretty stupid, huh?
- Words should mean what they mean...
Slide 10 Antitrust Intellectual History
- The bad old days
- The good new days
- The not so good new days??!
- International perspective
Slide 11 Dark Matter
- Good idea: intervene only if intervention benefits efficiency/consumers
- Maybe not such a good idea: only if can specifically prove that it would do so
- Benefits of competition
- Concrete, predictable, provable price effects
- Dark matter
Slide 12 Words and Presumption
- "Competition" means competition
- Competition usually serves efficiency and consumers, but that's a fact, not a definition
- Pretending it's a definition, while helpful in some ways, guts the crucial antitrust presumption
Slide 13 What does "competition" mean??
- Hard question
- Part of motive to redefine as "good stuff
- Exclusive dealing as example
- But that has huge dangers, maybe coming to roost
- Â Beyond the study of words...
- Want laissez-faire presumption
- Want pro-competition presumption too
- What to do?