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Economic Analysis And “Bright-Line” Tests

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  • Franklin M. Fisher

Abstract

Economists testifying in antitrust cases often encounter the demand by attorneys and judges for “bright-line” tests – simple rules supposedly based on economic analysis. This paper argues that, although such tests can have their uses, they are very likely to lead to error without a clear understanding of the purposes of the tests and the economics behind them. Issues discussed include: market definition, market share, the role of profits, and, especially, anti-competitive conduct (including the Areeda-Turner) test for predatory pricing. Examples are drawn from actual court cases (mostly in the U.S.), in many of which the author was an expert witness. The best known of these was the U.S. case against Microsoft, but there are many others.

Suggested Citation

  • Franklin M. Fisher, 2008. "Economic Analysis And “Bright-Line” Tests," Journal of Competition Law and Economics, Oxford University Press, vol. 4(1), pages 129-153.
    • Handle: RePEc:oup:jcomle:v:4:y:2008:i:1:p:129-153.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhm023
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    References listed on IDEAS

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    1. David S. Evans & Richard Schmalensee, 2002. "Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 1-50, National Bureau of Economic Research, Inc.
    2. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
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