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Organization, Control and the Single Entity Defense in Antitrust

  • Dean V. Williamson

    (Economic Analysis Group, Antitrust Division, Department of Justice)

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    Since at least the 1930's economists have puzzled over how to delineate the boundaries of the firm. With the advent of antitrust legislation in 1890, courts have been pressed to consider what constitute conspiracies between corporate entities to restrain commerce. By the 1940's, courts started to characterize conspiracies by sorting out what they are not — specifically, by extending the status of "single entity" to certain types of business arrangements. Both efforts in economics and in the law to sort out what constitutes a "firm" or "single entity" have focused on "control." A difficulty is that neither the law nor economics offer an operationally significant concept of control. Even so, both law and economics contribute concepts other than control that provide a way of understanding economic organization. These concepts — control rights, adaptation, delegation, and renegotiation — suggests how one can subsume the sometimes confusing array of single entity tests proposed in the case law within a two-stage sequence of tests.

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    File URL: http://www.justice.gov/atr/public/eag/221876.pdf
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    Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200604.

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    Length: 34 pages
    Date of creation: Jan 2006
    Date of revision:
    Handle: RePEc:doj:eagpap:200604
    Contact details of provider: Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
    Web page: http://www.justice.gov/atr/
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    1. Tian Zhu, 2003. "Specific Investments, Flexible Adaptation, and Requirement Contracts," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 299-304, April.
    2. Ashish Arora & Robert P. Merges, 2004. "Specialized supply firms, property rights and firm boundaries," Industrial and Corporate Change, Oxford University Press, vol. 13(3), pages 451-475, June.
    3. Paul L. Joskow, 1987. "Price Adjustment in Long Term Contracts: The Case of Coal," Working papers 444, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Crocker, K.J. & Masten, S.E., 1988. "Pretia Ex Machina?: Prices And Process In Long-Term Contracts," Papers 10-88-2, Pennsylvania State - Department of Economics.
    5. Saussier, Stephane, 2000. "Transaction costs and contractual incompleteness: the case of Electricite de France," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 189-206, June.
    6. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
    7. Masten, Scott E & Crocker, Keith J, 1985. "Efficient Adaptation in Long-term Contracts: Take-or-Pay Provisions for Natural Gas," American Economic Review, American Economic Association, vol. 75(5), pages 1083-93, December.
    8. Justin Zhang & Tian Zhu, 2000. "Verifiability, Incomplete Contracts and Dispute Resolution," European Journal of Law and Economics, Springer, vol. 9(3), pages 281-290, May.
    9. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
    10. Keith J. Crocker & Scott E. Masten, 1988. "Mitigating Contractual Hazards: Unilateral Options and Contract Length," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 327-343, Autumn.
    11. Steven Tadelis, 2002. "Complexity, Flexibility, and the Make-or-Buy Decision," American Economic Review, American Economic Association, vol. 92(2), pages 433-437, May.
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