Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, October 1, 2010

Antitrust and the Costs of Movement

Posted by D. Daniel Sokol

Herb Hovenkamp (Iowa Law) explains Antitrust and the Costs of Movement.

ABSTRACT: Antitrust has always been concerned about the structure of markets as well as with the bargaining that goes on within them. As a result, the absolute cost of redeploying resources can be just as important as the transaction costs of arranging for their movement. This essay examines several broad themes in antitrust, considering the role of various assumptions about the costs of getting resources moved toward superior positions and the ability of the antitrust system to facilitate this movement. Part II very briefly examines structuralism as a theory underlying antitrust enforcement, particularly its assumptions about the difficulty and costs of moving resources. Part III turns to barriers to entry or rival expansion, looking particularly at the differing definitions provided by Harvard and Chicago School economists and showing why the Harvard definition is superior for antitrust purposes. Part IV argues that we need to rethink current antitrust doctrine about refusal to deal in dominated networks, which are networks that both dominate the markets in which they operate and are themselves dominated by a single firm. Part V then looks at some problems of vertical integration and product complementarity, and at the contributions that transaction cost analysis can provide in cases involving asset specificity and the possibility of double marginalization. Part VI then examines some specific problems of pricing and vertical control, looking in particular at the wide range of theoretical attacks on and defenses of so-called loyalty discounts and bundled discounts. In particular, it faults policy making based on models with restrictive and sometimes idiosyncratic assumptions and untested conclusions. Part VII concludes with a brief discussion of antitrust’s two principal tests for welfare, total welfare or consumer welfare, and how they are related to our assumptions about the costs of movement.

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