April 8, 2011
A Neo-Chicago Approach to Concerted Action
Posted by D. Daniel Sokol
William Page (University of Florida - Law) has posted A Neo-Chicago Approach to Concerted Action.
ABSTRACT: In this article, I offer an approach to concerted action that builds on traditional Chicago School analyses of the issue, but adds a focus on the role of communication. Chicago scholars uniformly identify cartels as the primary target of antitrust enforcement. They have also established much of the framework within which courts and economists analyze concerted action. George Stigler’s seminal theory of oligopoly, which sought to identify the determinants of effective collusion, has spawned an enormous literature in game theory that models the pricing behavior of oligopolists. Richard Posner’s early analysis of tacit collusion - rivals’ coordination of noncompetitive pricing without express communication - extended Stigler’s analysis to the domain of law and policy. His approach to oligopoly pricing drew on economic theory and evidence both to define tacit collusion as concerted action and to identify structural and behavioral characteristics of markets that suggested its presence.
I argue that Posner’s approach, refocused on the role of communication, provides the most promising way forward in the analysis of concerted action. After recounting the history of the Chicago School’s analysis of concerted action, I propose a modified definition of concerted action and suggest how the change might affect the search for instances of concerted action. I argue that Section 1 does not reach tacit collusion, but neither does it require a verbal agreement; instead, actions are concerted if rivals coordinate them in part by communicating their intentions. I argue that this focus on communicative concerted action, despite its departure from Posner’s legal position, is consistent with the Chicago tradition, particularly error cost analysis. Its neo-Chicago character lies in its reliance on the most recent economic literature on the role of communication in collusion. In the last part of the article, I examine a small but important subset of that literature: studies of how real-world cartels use communication and facilitating practices to achieve their aims. Based on these studies, I suggest how plaintiffs and enforcement agencies might discover concerted action by examining changing patterns in the use of facilitating practices.
April 8, 2011 | Permalink
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