Comments on: Conceptual Foundations of Antitrust Law http://www.antitrustreview.com/archives/317 News and commentary about antitrust, economics, technology, policy Thu, 20 Nov 2008 10:22:59 +0000 http://wordpress.org/?v=2.2 By: Hanno Kaiser http://www.antitrustreview.com/archives/317#comment-762 Hanno Kaiser Fri, 10 Mar 2006 23:22:42 +0000 http://www.antitrustreview.com/archives/317#comment-762 <p>Consumer welfare as I understand the term is utility derived from the enjoyment of goods and services by the consumer. The level of utility depends on the price, quantity, and variety of the goods and services. (I explained my position regarding the use of the term consumer welfare in a <a href="http://www.antitrustreview.com/archives/55" rel="nofollow">previous post</a>.) The monopsony point, of course, is well taken. The consumer welfare effects of monoposony are much less clear cut than those of monopoly. (i) A firm with market power on the buy <em>and</em> sell side will likely contract input quantity below competitive levels and then sell "less for more" to its customers. In contrast, (ii) a firm with buyer power that sells in competitive markets won't be able to directly harm consumers. Capturing the effects (ii) would require us to consider <em>total welfare</em> losses, which the law has been trying to do to some extent (you mentioned <em>Todd v. Exxon</em>, where the effect was on input prices, i.e., labor costs; one could also think of instances of predatory overbuying).</p> Consumer welfare as I understand the term is utility derived from the enjoyment of goods and services by the consumer. The level of utility depends on the price, quantity, and variety of the goods and services. (I explained my position regarding the use of the term consumer welfare in a previous post.) The monopsony point, of course, is well taken. The consumer welfare effects of monoposony are much less clear cut than those of monopoly. (i) A firm with market power on the buy and sell side will likely contract input quantity below competitive levels and then sell “less for more” to its customers. In contrast, (ii) a firm with buyer power that sells in competitive markets won’t be able to directly harm consumers. Capturing the effects (ii) would require us to consider total welfare losses, which the law has been trying to do to some extent (you mentioned Todd v. Exxon, where the effect was on input prices, i.e., labor costs; one could also think of instances of predatory overbuying).

]]> By: Antitrust Review » Market Power or Monopoly Power? A Response to Josh Wright http://www.antitrustreview.com/archives/317#comment-752 Antitrust Review » Market Power or Monopoly Power? A Response to Josh Wright Fri, 03 Mar 2006 19:06:53 +0000 http://www.antitrustreview.com/archives/317#comment-752 <p>[...] The goal of the antitrust laws is to protect competition as a necessary condition of free markets, the currently best available means of continuously increasing consumer welfare. (To be sure, free markets don’t succeed on that score in all instances, but by and large they do a better job at it than any other arrangement has done so far.) We thus want a prohibition only for those kinds of price discrimination that are detrimental to consumer welfare. Against that backdrop, how can we tell good discrimination from bad discrimination? If we could measure the welfare effects directly, that wouldn’t be a problem. But more often than not we can’t, and so we have to rely on inferences and proxies, unless we want to forego regulation altogether. [...]</p> […] The goal of the antitrust laws is to protect competition as a necessary condition of free markets, the currently best available means of continuously increasing consumer welfare. (To be sure, free markets don’t succeed on that score in all instances, but by and large they do a better job at it than any other arrangement has done so far.) We thus want a prohibition only for those kinds of price discrimination that are detrimental to consumer welfare. Against that backdrop, how can we tell good discrimination from bad discrimination? If we could measure the welfare effects directly, that wouldn’t be a problem. But more often than not we can’t, and so we have to rely on inferences and proxies, unless we want to forego regulation altogether. […]

]]> By: pk http://www.antitrustreview.com/archives/317#comment-737 pk Tue, 28 Feb 2006 16:46:47 +0000 http://www.antitrustreview.com/archives/317#comment-737 <p>Are you using the phrase "consumer welfare" in the Borkian sense, i.e. "total welfare", or are you claiming that the purpose of antitrust is to maximize consumer surplus?</p> <p>In addition, your overview of antitrust policy is understandably focused on monopoly, but what about monopsony? If a monopsonist has no power in the output market (perhaps because of very close substitutes), is there an antitrust problem at all, even assuming there are substantial wealth transfers from producer to monopsonist? If this is not an antitrust problem, are cases like Todd v. Exxon Corp. wrongly decided?</p> Are you using the phrase “consumer welfare” in the Borkian sense, i.e. “total welfare”, or are you claiming that the purpose of antitrust is to maximize consumer surplus?

In addition, your overview of antitrust policy is understandably focused on monopoly, but what about monopsony? If a monopsonist has no power in the output market (perhaps because of very close substitutes), is there an antitrust problem at all, even assuming there are substantial wealth transfers from producer to monopsonist? If this is not an antitrust problem, are cases like Todd v. Exxon Corp. wrongly decided?

]]> By: Antitrust Review » Conceptual Foundations of Antitrust Law; Follow-up http://www.antitrustreview.com/archives/317#comment-735 Antitrust Review » Conceptual Foundations of Antitrust Law; Follow-up Mon, 27 Feb 2006 20:05:50 +0000 http://www.antitrustreview.com/archives/317#comment-735 <p>[...] Following up on my previous posts about the conceptual foundations of antitrust law (here and here), the chart below illustrates the relationship between the ultimate goal of economic policy (consumer welfare), the primary means of achieving it (free markets, competition), and the mission of the antitrust laws (prohibiting conduct having significant anticompetitive effects) as a policy tool for promoting competition and therefore consumer welfare. Moreover, the chart depicts the two most important proxies for anticompetitive conduct, market power (the ability and the incentive to raise prices) and market concentration (e.g., HHI measures), as well as the evidence typically introduced to prove anticompetitive effects directly or circumstantially by establishing the factual predicates for one of the two proxies. Against this backdrop, it is apparent that much of the traditional merger analysis involves the least direct evidence of anticompetitive effects. Delineating markets, identifying market participants, and computing market shares all contribute to establishing a market concentration measure. That measure, in turn, permits the inference of market power (Step 1). Market power permits the inference of anticompetitive effects (Step 2). The diminution of competition, finally, permits the inference of a consumer welfare loss (Step 3).Technorati Tags: antitrust, inference, competitive effects, consumer welfare, economic policy You can also bookmark this on del.icio.us or check the cosmos [...]</p> […] Following up on my previous posts about the conceptual foundations of antitrust law (here and here), the chart below illustrates the relationship between the ultimate goal of economic policy (consumer welfare), the primary means of achieving it (free markets, competition), and the mission of the antitrust laws (prohibiting conduct having significant anticompetitive effects) as a policy tool for promoting competition and therefore consumer welfare. Moreover, the chart depicts the two most important proxies for anticompetitive conduct, market power (the ability and the incentive to raise prices) and market concentration (e.g., HHI measures), as well as the evidence typically introduced to prove anticompetitive effects directly or circumstantially by establishing the factual predicates for one of the two proxies. Against this backdrop, it is apparent that much of the traditional merger analysis involves the least direct evidence of anticompetitive effects. Delineating markets, identifying market participants, and computing market shares all contribute to establishing a market concentration measure. That measure, in turn, permits the inference of market power (Step 1). Market power permits the inference of anticompetitive effects (Step 2). The diminution of competition, finally, permits the inference of a consumer welfare loss (Step 3).Technorati Tags: antitrust, inference, competitive effects, consumer welfare, economic policy You can also bookmark this on del.icio.us or check the cosmos […]

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