Competition Policy with Optimally Differentiated Rules Instead of "Per se Rules vs. Rule of Reason"
AbstractAbstract: Both in US antitrust and EU competition policy a development to a broader appli-cation of rule of reason instead of per se rules can be observed. In the European discussion the attempt to base competition policy on a "more economic approach" is mainly viewed as im-proving the economic analysis in the assessment of specific cases. In this paper it is shown from a general law and economics perspective that the application of rules instead of focus-sing on case-by-case analyses can have many advantages (less regulation costs, rent seeking and knowledge problems), although an additional differentiation of rules through a deeper assessment can also have advantages in regard to the reduction of decision errors of type I and II. After introducing the notion of a continuum of more or less differentiated rules, we show - based upon law and economics literature upon the optimal complexity of rules - in a simple model that a competition rule is optimally differentiated, if the marginal reduction of the sum of error costs (as the marginal benefit of differentiation) equals the marginal costs of differen-tiation. This model also allows for a more detailed analysis of the most important determi-nants of the optimal degree of rule-differentia¬tion. From this law and economics perspective, competition policy should consist mainly of (more or less differentiated) rules and should only rarely rely on case-by-case analysis. Therefore the main task of a "more economic ap-proach" is to use economics for the formulation of appropriate competition rules.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series Marburg Working Papers on Economics with number 200606.
Length: 26 pages
Date of creation: 2006
Date of revision:
Competition Policy; European Competition Law; Rule of Reason;
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-27 (All new papers)
- NEP-COM-2006-05-27 (Industrial Competition)
- NEP-EEC-2006-05-27 (European Economics)
- NEP-LAW-2006-05-27 (Law & Economics)
- NEP-REG-2006-05-27 (Regulation)
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