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

30 Pages Posted: 9 Nov 2004

See all articles by Jorge Padilla

Jorge Padilla

Compass Lexecon

David S. Evans

Market Platform Dynamics; Berkeley Research Group, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

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.

JEL Classification: K21, L40

Suggested Citation

Padilla, Jorge and Evans, David S., Designing Antitrust Rules for Assessing Unilateral Practices: A Neo-Chicago Approach (September 2004). Available at SSRN: https://ssrn.com/abstract=617311

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

David S. Evans (Contact Author)

Market Platform Dynamics ( email )

140 South Dearborn St.
Chicago, IL 60603
United States

Berkeley Research Group, LLC ( email )

99 High St.
Boston, MA 02110
United States

HOME PAGE: http://davidsevans.org

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