Social Network Activity: Desktop vs. Mobile. Percentage of time spent on social networks in the United States. pic.twitter.com/xNW8yJMu4w
— Ninja Economics (@NinjaEconomics) December 6, 2014
Creative destruction alert: whatever happened to the Microsoft monopoly?
09 Dec 2014 Leave a comment
The Attack on Concentration: Yale Brozen (1979)
06 Dec 2014 Leave a comment
in applied price theory, applied welfare economics, industrial organisation, survivor principle Tags: anti-trust law, competition law, creative destruction, The meaning of competition
There is a distinction between controlling the supply of a product and producing or selling most of the supply of a product.
“Dominant” producers who sell a major portion of a product’s supply usually have no control over the supply. They have no power to set any lower level of industry output and a higher price than that which would prevail in a market with many suppliers and no dominant firm.
Usually, a dominant producer is the most efficient firm in the industry. Its large output is the result of its efficiency in supplying the market. The market price is as low as it would be with many producers frequently lower.
Any attempt by a dominant firm to restrict its own supply and increase price after reaching a “dominant” position simply results in the expansion of output by other firms, the entry of additional firms, and loss of its dominance. A dominant firm can keep its dominance only by behaving competitively.
The fact that there is a dominant firm, or small group of firms, in an industry is evidence of competitive behavior not of monopolization.
via The Attack on Concentration: Newsroom: The Independent Institute.
A fool-proof test of the competitive impact of a merger
11 Apr 2014 Leave a comment
in industrial organisation, law and economics Tags: Aaron Director, antitrust law, competition law, mergers
Was it Frank Easterbrook in the 1980s or Aaron Director in the 1950s who said that the clearest evidence of a pro-competitive merger was if the rival firms in the same market asked the competition law enforcement agency to take action against it?
Do the competitors oppose the merger? If they do, the merger must lower prices and put their profits under pressure.
When was the last time a competitor complained about their rivals putting their prices up? Either they hold their prices and take their business or follow their pricing lead: can’t lose.
Business rivals have an interest in higher prices. Consumers seek lower prices. Easterbrook suggested that lower prices should always be lawful under competition law.
The aim of competition law is to increase consumer welfare by preventing restrictions of output that increase prices: prevent “prices that are too high” due to monopoly power. The merits of that statement is for another blog posting.
George Stigler was blunt on regulating to promote competition:
Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: “Competition Not Admitted.” The Federal Trade Commission’s doorway should announce, “Competition Admitted in Rear,” and that of the Antitrust Division, “Monopoly Only by Appointment”
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