Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0007
- Subject:
- Economics and Finance, Economic History
This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ...
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This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ground such regulation in modern economic understandings, it would seem to follow that, if the law's notion of agreement reflects economic substance, the agreement requirement would correspond to a core distinction drawn in oligopoly theory. As it turns out, that theory, which is an application of game theory (particularly, that of repeated games), does have an explicit notion of agreement. But this notion refers to binding agreements and thus is irrelevant for present purposes because competition law renders horizontal price-fixing agreements void ab initio.Less
This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ground such regulation in modern economic understandings, it would seem to follow that, if the law's notion of agreement reflects economic substance, the agreement requirement would correspond to a core distinction drawn in oligopoly theory. As it turns out, that theory, which is an application of game theory (particularly, that of repeated games), does have an explicit notion of agreement. But this notion refers to binding agreements and thus is irrelevant for present purposes because competition law renders horizontal price-fixing agreements void ab initio.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0001
- Subject:
- Economics and Finance, Economic History
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same ...
More
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same time arguing for a straightforward approach to the issue. Systematic comparison with a more direct, functional approach reveals conventional means to be inferior and in important respects counterproductive in cases without smoking-gun evidence. In those settings, a direct approach dominates the conventionally favored communications-based prohibition in that the former targets situations that involve both greater social harm and less risk of chilling desirable behavior than those most likely to generate liability under the latter. The direct approach is also less difficult to administer, contrary to conventional wisdom.Less
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same time arguing for a straightforward approach to the issue. Systematic comparison with a more direct, functional approach reveals conventional means to be inferior and in important respects counterproductive in cases without smoking-gun evidence. In those settings, a direct approach dominates the conventionally favored communications-based prohibition in that the former targets situations that involve both greater social harm and less risk of chilling desirable behavior than those most likely to generate liability under the latter. The direct approach is also less difficult to administer, contrary to conventional wisdom.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- book
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.001.0001
- Subject:
- Economics and Finance, Economic History
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes ...
More
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings conflict with the teachings of oligopoly theory that supposedly underlie modern competition policy. This book offers a fresh, in-depth exploration of competition law's horizontal agreement requirement, presents a systematic analysis of how best to address the problem of coordinated oligopolistic price elevation, and compares the resulting direct approach to the orthodox prohibition. The book elaborates the relevant benefits and costs of potential solutions, investigates how coordinated price elevation is best detected in light of the error costs associated with different types of proof, and examines appropriate sanctions. Existing literature devotes remarkably little attention to these key subjects and instead concerns itself with limiting penalties to certain sorts of interfirm communications. Challenging conventional wisdom, the book shows how this circumscribed view is less well grounded in the statutes, principles, and precedents of competition law than is a more direct, functional proscription. More important, by comparison to the communications-based prohibition, the book explains how the direct approach targets situations that involve both greater social harm and less risk of chilling desirable behavior—and is also easier to apply.Less
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings conflict with the teachings of oligopoly theory that supposedly underlie modern competition policy. This book offers a fresh, in-depth exploration of competition law's horizontal agreement requirement, presents a systematic analysis of how best to address the problem of coordinated oligopolistic price elevation, and compares the resulting direct approach to the orthodox prohibition. The book elaborates the relevant benefits and costs of potential solutions, investigates how coordinated price elevation is best detected in light of the error costs associated with different types of proof, and examines appropriate sanctions. Existing literature devotes remarkably little attention to these key subjects and instead concerns itself with limiting penalties to certain sorts of interfirm communications. Challenging conventional wisdom, the book shows how this circumscribed view is less well grounded in the statutes, principles, and precedents of competition law than is a more direct, functional proscription. More important, by comparison to the communications-based prohibition, the book explains how the direct approach targets situations that involve both greater social harm and less risk of chilling desirable behavior—and is also easier to apply.