Appropriate Antitrust Policy Towards Single-Firm Conduct
In this article we distinguish between two types of single-firm conduct. The first, which we call "extraction," is conduct engaged in by the firm to capture surplus from what the firm has itself created independent of the conduct’s effect on rivals. The second, which we call “extension," is single firm conduct that increases the firm’s profit by weakening or eliminating the competitive constraints provided by products of rivals. We propose as a fundamental antitrust policy towards single-firm conduct the following: Conduct merely to extract surplus the firm has created independent of the conduct’s effect on rivals should be permitted. Conversely, conduct that extends the firm’s market power by impairing the competitive constraints imposed by rivals presents a legitimate cause for concern. We subscribe strongly to the view that an essential element of appropriate antitrust policy is to allow a firm to capture as much of the surplus that, by its own investment, innovation, industry or foresight, the firm has itself brought into existence. We believe that alternative approaches to single-firm conduct, including in particular ones aiming to enhance static efficiency at the possible cost of dynamic efficiency and ones seeking to maximize overall welfare through more targeted intervention on a case-by-case basis (not to mention the use of competition policy to protect competitors rather than consumers) threaten seriously to impede economic growth and welfare over time. A policy that goes further, and which permits all unilateral conduct regardless of competitive effects (perhaps on grounds that "even more profit will generate even more innovation") is considered below and rejected as overly lenient, inconsistent with widely accepted presumptions in favor of inter-firm competition, and unwise, at least under the current state of economic knowledge. But we note that this conclusion is one based on our current economic knowledge and should remain a topic of ongoing research. It requires an empirical assessment of the gains from motivating more competition ex ante versus the subsequent loss of competition ex post.
|Date of creation:||Mar 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.justice.gov/atr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dennis W. Carlton & Randal C. Picker, 2013.
"Antitrust and Regulation,"
in: Economic Regulation and Its Reform: What Have We Learned?, pages 25-61
National Bureau of Economic Research, Inc.
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- Dennis W. Carlton & Michael Waldman, 2002.
"The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries,"
RAND Journal of Economics,
The RAND Corporation, vol. 33(2), pages 194-220, Summer.
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," NBER Working Papers 6831, National Bureau of Economic Research, Inc.
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State.
- Russell Pittman, 2007.
"Consumer Surplus as the Appropriate Standard for Antitrust Enforcement,"
EAG Discussions Papers
200709, Department of Justice, Antitrust Division.
- Russ Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," CPI Journal, Competition Policy International, vol. 3.
- Dennis W. Carlton & Robert H. Gertner, 2003.
"Intellectual Property, Antitrust, and Strategic Behavior,"
in: Innovation Policy and the Economy, Volume 3, pages 29-60
National Bureau of Economic Research, Inc.
- Dennis W. Carlton & Robert H. Gertner, 2002. "Intellectual Property, Antitrust and Strategic Behavior," NBER Working Papers 8976, National Bureau of Economic Research, Inc.
- Dennis W. Carlton, 2001. "A General Analysis of Exclusionary Conduct and Refusal to Deal - Why Aspen and Kodak are Misguided," NBER Working Papers 8105, National Bureau of Economic Research, Inc.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Dennis W. Carlton & Michael Waldman, 2008. "Safe Harbors for Quantity Discounts and Bundling," EAG Discussions Papers 200801, Department of Justice, Antitrust Division.
When requesting a correction, please mention this item's handle: RePEc:doj:eagpap:200802. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tung Vu)
If references are entirely missing, you can add them using this form.