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Economic Evidence in Antitrust: Defining Markets and Measuring Market Power

46 Pages Posted: 20 Sep 2006  

Jonathan B. Baker

American University - Washington College of Law

Timothy Bresnahan

Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Date Written: September 2006

Abstract

This paper addresses an important aspect of the interdisciplinary collaboration between law and economics: the use antitrust courts can and should make of empirical industrial organization economics, in light of the expansion of empirical knowledge generated during the last few decades. First we show how courts can apply what economists have learned about identification of alternative theories of industry structure and firm strategy to the problems of defining markets and determining whether market power has been exercised. We emphasize that the same analytic issues arise regardless of whether the evidence on these concepts is quantitative or qualitative. Second we show how courts can adopt a strategy employed in the research literature, by exploiting generalizations across closely related industries to help evaluate evidence and resolve cases. We also discuss ways of increasing the institutional capacity of the judicial system to make use of these two bodies of economic learning. These include a possible limited role for neutral economic experts in litigation, and a role for the antitrust enforcement agencies in identifying and codifying relevant generalizations about industries from the empirical economic literature to make that learning available to courts.

Keywords: antitrust, market definition, market power

JEL Classification: L4, K22

Suggested Citation

Baker, Jonathan B. and Bresnahan, Timothy, Economic Evidence in Antitrust: Defining Markets and Measuring Market Power (September 2006). Stanford Law and Economics Olin Working Paper No. 328. Available at SSRN: https://ssrn.com/abstract=931225 or http://dx.doi.org/10.2139/ssrn.931225

Jonathan B. Baker (Contact Author)

American University - Washington College of Law ( email )

4300 Nebraska Avenue, NW
Washington, DC 20016
United States
202-274-4315 (Phone)

Timothy F. Bresnahan

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-725-5702 (Fax)

Stanford Graduate School of Business ( email )

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Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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