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Book part
Publication date: 24 May 2021

Wenqing Li, Nathan Petek and Hassan Faghani

When products are differentiated, applying the standard critical loss formula to assess whether it is profitable for a hypothetical monopolist to impose a common price…

Abstract

When products are differentiated, applying the standard critical loss formula to assess whether it is profitable for a hypothetical monopolist to impose a common price increase can lead to delineating an antitrust market that is too broad by setting a critical loss threshold that is too low. This error is particularly likely to occur when the products exhibit very different per-unit profits, own price elasticities, and cross price elasticities. In particular, different per-unit profits are a necessary condition for this error to occur and this difference is more likely to be driven by an asymmetry in prices than by an asymmetry in costs when own price elasticities are moderate in magnitude. In contrast, differences in the quantity sold of each product do not tend to lead to errors in market definition. Given the issues associated with the standard critical loss analysis, critical loss analysis with asymmetric price increases and the gross upward pricing pressure index are practical alternative approaches for conducting market definition analysis when products in a candidate market are differentiated.

Details

The Law and Economics of Patent Damages, Antitrust, and Legal Process
Type: Book
ISBN: 978-1-80071-024-5

Keywords

Book part
Publication date: 29 August 2018

Paul A. Pautler

The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the…

Abstract

The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the preferences and ideology of the FTC’s leaders, developments in the field of economics, and the tenor of the times. The over-riding current role is to provide well considered, unbiased economic advice regarding antitrust and consumer protection law enforcement cases to the legal staff and the Commission. The second role, which long ago was primary, is to provide reports on investigations of various industries to the public and public officials. This role was more recently called research or “policy R&D”. A third role is to advocate for competition and markets both domestically and internationally. As a practical matter, the provision of economic advice to the FTC and to the legal staff has required that the economists wear “two hats,” helping the legal staff investigate cases and provide evidence to support law enforcement cases while also providing advice to the legal bureaus and to the Commission on which cases to pursue (thus providing “a second set of eyes” to evaluate cases). There is sometimes a tension in those functions because building a case is not the same as evaluating a case. Economists and the Bureau of Economics have provided such services to the FTC for over 100 years proving that a sub-organization can survive while playing roles that sometimes conflict. Such a life is not, however, always easy or fun.

Details

Healthcare Antitrust, Settlements, and the Federal Trade Commission
Type: Book
ISBN: 978-1-78756-599-9

Keywords

Book part
Publication date: 24 May 2021

James Langenfeld and Frank Fagan

This issue of Research in Law and Economics covers several areas of important research by a variety of international scholars. It contains technical papers on the…

Abstract

This issue of Research in Law and Economics covers several areas of important research by a variety of international scholars. It contains technical papers on the appropriate way to estimate damages in patent disputes, as well as methods for evaluating relevant markets and vertically integrated firms when determining the competitive effects of mergers and other actions. There are also papers on the implication of different legal processes, regulations, and liability rules on consumer welfare, which range from the impact of delays in legal decisions in labor cases in France to issues of criminal liability related to the use of artificial intelligence.

Details

The Law and Economics of Patent Damages, Antitrust, and Legal Process
Type: Book
ISBN: 978-1-80071-024-5

Keywords

Content available
Book part
Publication date: 22 March 2022

Abstract

Details

The Law and Economics of Privacy, Personal Data, Artificial Intelligence, and Incomplete Monitoring
Type: Book
ISBN: 978-1-80262-002-3

Content available
Book part
Publication date: 24 May 2021

Abstract

Details

The Law and Economics of Patent Damages, Antitrust, and Legal Process
Type: Book
ISBN: 978-1-80071-024-5

Book part
Publication date: 22 March 2022

Frank Fagan and James Langenfeld

This issue of Research in Law and Economics covers several areas of important research by a variety of international scholars. It contains theoretical papers on privacy…

Abstract

This issue of Research in Law and Economics covers several areas of important research by a variety of international scholars. It contains theoretical papers on privacy, the protection of personal data, the use of regulatory monitoring under legal standards vs. rules, a study of the properties of market efficiency in securities fraud litigation, as well as an analysis of nonexclusionary price floors. It also contains an empirical paper on the relationship between uncertainty of patent approval of artificial intelligence applications and the Supreme Court's decision in Alice Corp. v. CLS Bank International. Finally, Volume 30 contains a law-and-economics assessment of the Chinese financial system within the context of the trade-off between centralized control and rapid growth.

Details

The Law and Economics of Privacy, Personal Data, Artificial Intelligence, and Incomplete Monitoring
Type: Book
ISBN: 978-1-80262-002-3

Keywords

Abstract

Details

The Law and Economics of Class Actions
Type: Book
ISBN: 978-1-78350-951-5

Book part
Publication date: 23 November 2015

James Langenfeld, Jonathan T. Tomlin, David A. Weiskopf and Georgi Giozov

To develop a framework for systematically defining the relevant market for intermediate goods that incorporates downstream market conditions.

Abstract

Purpose

To develop a framework for systematically defining the relevant market for intermediate goods that incorporates downstream market conditions.

Methodology/approach

We combine the well-established “Hicks-Marshall” conditions of derived demand for inputs with “critical loss/critical elasticity of demand” to yield insights into the definition of antitrust markets for intermediate goods and the competitive effects from a merger.

Findings

We show that examining “Hicks-Marshall” conditions can provide a more rigorous framework for analyzing relevant markets for intermediate goods. We also show that solely examining demand substitution possibilities for direct customers of an input can lead to an incorrect market definition.

Research limitations/implications

Our framework may be difficult to apply in circumstances when several different downstream products use the input being examined and each of those downstream products has a different elasticity of demand.

Practical implications

We illustrate how reasonable ranges for key parameters relating to the ability of firms to substitute to other inputs and to adjust to downstream market conditions will often be sufficient to define antitrust markets for intermediate goods in practice.

Originality/value

Previous antitrust analysis has not systematically analyzed the impact of downstream market conditions in assessing market definition for intermediate goods. The framework we develop will be useful to future researchers attempting to define relevant markets for intermediate goods and evaluating the competitive effects of a merger.

Details

Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children
Type: Book
ISBN: 978-1-78560-562-8

Keywords

Content available
Book part
Publication date: 29 August 2018

Abstract

Details

Healthcare Antitrust, Settlements, and the Federal Trade Commission
Type: Book
ISBN: 978-1-78756-599-9

Book part
Publication date: 22 March 2022

Dennis L. Weisman

This chapter integrates two separate branches of the law and economics literature to demonstrate the two-sided risk of market exclusion by a vertically integrated firm…

Abstract

This chapter integrates two separate branches of the law and economics literature to demonstrate the two-sided risk of market exclusion by a vertically integrated firm (VIF) with upstream and downstream market power. The ratio of downstream (retail) to upstream (wholesale) price-cost margins is key. A margin ratio that is “too low” can result in a vertical price squeeze, whereas one that is “too high” can create incentives for the VIF to engage in non-price discrimination or sabotage. A price squeeze occurs when a rival is inefficiently foreclosed because the upstream (input) price is too high relative to the downstream (output) price. Sabotage arises when the VIF raises its rivals' costs which, in turn, raises their prices and diverts demand from the rivals to the VIF. Displacement ratios delineate the range of safe harbor margin ratios within which neither form of market exclusion arises. The admissible range of these margin ratios is decreasing in the degree of product substitutability and reduces to a single ratio in the limit as the competing products approach perfect substitutes. The policy challenge is to apply these pricing constraints judiciously to prevent market exclusion in accordance with a consumer-welfare standard, while recognizing the risk that these protections can be appropriated and used strategically in the errant pursuit of a competitor-welfare standard. These issues may take on greater prominence in light of the recent release of the DOJ/FTC draft vertical merger guidelines.

Details

The Law and Economics of Privacy, Personal Data, Artificial Intelligence, and Incomplete Monitoring
Type: Book
ISBN: 978-1-80262-002-3

Keywords

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