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

45 Pages Posted: 13 Sep 2004  

Jorge Padilla

Compass Lexecon

David S. Evans

Global Economics Group; University College London

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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.

Keywords: Chicago School, post-Chicago, unilateral business practices, antitrust, error costs, tying

Suggested Citation

Padilla, Jorge and Evans, David S., Designing Antitrust Rules for Assessing Unilateral Practices: A Neo-Chicago Approach. University of Chicago Law Review, Vol. 72, Winter 2005. Available at SSRN: https://ssrn.com/abstract=580882

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

David S. Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

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