Exuberant investors and oil market dynamics from 1859 to 1913: implications for the current big tech antitrust

This study analyses the oil market dynamics during the period of 1859–1913 to shed light on the current antitrust debate involving the largest tech firms in the platform economy. It is found that changes in the number of new oil wells and producing wells are not Granger caused by changes in interest rates and crude prices, respectively. There is no contemporaneous relation between interest rates and the number of new wells or between crude prices and the number of producing wells, indicating that exuberant investors are not deterred by adverse movements in the cost of capital. It is found that price margin between gasoline and crude oil is higher during the trust period than during the non-trust period. These findings show a historical precedent in price decreases and highlight the potential pitfall in assessing consumer welfare solely through the lens of product prices in antitrust enforcement. Similar to those who funded the oil rush in the nineteenth century, today’s exuberant investors are funding the expansion of tech firms providing free services. A new regulatory regime with a reasonable return to the traditional doctrine of the rule of reason may help deter the excessive exuberant investors in today’s platform economy.