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Designing Antitrust Rules for Assessing Unilateral Practices: A Neo-Chicago Approach

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  • Evans, David S.
  • Padilla, Jorge

Abstract

This essay describes an approach for designing antitrust rules for assessing whether firms have engaged in anticompetitive unilateral practices that is based in part on the error-cost framework pioneered by Judge Easterbrook. We focus particularly on the role of economic theory and evidence in forming presumptions about the likelihood that unilateral business practices reduce welfare and on the implications of this role for the kinds of research that economists need to conduct concerning unilateral business practices. We then apply this approach to tying. Our approach towards designing legal rules proceeds in two steps. First, economic theory and empirical evidence are used to formulate explicitly a set of presumptions regarding the cost and likelihood of errors resulting from condemning welfare-increasing business practices or condoning welfare-reducing ones. Second, based on those presumptions, a legal rule that minimizes the cost of errors is selected. We will refer to this as a neo-Chicago approach, since it accepts the fundamental tenet of Chicago thinking that legal rules and legal outcomes can and should be assessed based on their efficiency properties, while also incorporating the learning of the Chicago and post-Chicago literatures in designing these rules.

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Bibliographic Info

Paper provided by Regulation2point0 in its series Working paper with number 336.

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Date of creation: Sep 2004
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Handle: RePEc:reg:wpaper:336

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Web page: http://regulation2point0.org/

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Cited by:
  1. Javier Díaz-Giménez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms In The U.S.: A Boon For The Income Poor," Working Papers wp2006_0611, CEMFI.
  2. Ceron, Jose A. & Suarez, Javier, 2006. "Hot and Cold Housing Markets: International Evidence," CEPR Discussion Papers 5411, C.E.P.R. Discussion Papers.
  3. repec:hal:journl:halshs-00177629 is not listed on IDEAS
  4. Juan-José Ganuza & Gerard Llobet & Beatriz Domínguez, 2009. "R& D in the Pharmaceutical Industry: A World of Small Innovations," Management Science, INFORMS, vol. 55(4), pages 539-551, April.
  5. Abel Elizalde & Rafael Repullo, 2004. "Economic And Regulatory Capital. What Is The Difference?," Working Papers wp2004_0422, CEMFI.
  6. David S. Evans & Michael Salinger, 2005. "Curing Sinus Headaches and Tying Law: An Empirical Analysis of Bundling Decongestants and Pain Relievers," CESifo Working Paper Series 1519, CESifo Group Munich.
  7. Aleix Calveras & Juan José Ganuza & Gerard Llobet, 2005. "Regulation and opportunism: How much activism do we need?," Economics Working Papers 935, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Yannis Katsoulacos & David Ulph, 2008. "On Optimal Legal Standards for Competition Policy: A General Welfare-Based Analysis," Discussion Paper Series, Department of Economics 200812, Department of Economics, University of St. Andrews.

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