Handbook of Antitrust Economics

711 Pages·2008·3.24 MB·English

by  Paolo Buccirossi

Handbook of Antitrust Economics

Handbook of Antitrust Economics
edited by PaoloBuccirossi
TheMITPress
Cambridge,Massachusetts
London,England
62008MassachusettsInstituteofTechnology
Allrightsreserved.Nopartofthisbookmaybereproducedinanyformbyanyelectronicormechanicalmeans
(includingphotocopying,recording,orinformationstorageandretrieval)withoutpermissioninwritingfromthe
publisher.
Forinformationaboutspecialquantitydiscounts,[email protected]
ThisbookwassetinTimesNewRomanandSyntaxon3B2byAscoTypesetters,HongKong.
PrintedandboundintheUnitedStatesofAmerica.
LibraryofCongressCataloging-in-PublicationData
Handbookofantitrusteconomics/editedbyPaoloBuccirossi.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN978-0-262-02627-7(hardcover:alk.paper)—ISBN978-0-262-52477-3(pbk.:alk.paper) 1.Consolidation
andmergerofcorporations. 2.Industrialorganization(Economictheory) 3.Antitrustlaw—Economicaspects.
I.Buccirossi,Paolo.
HD2746.5.H3584 2007
338.8—dc22 2007002665
10 9 8 7 6 5 4 3 2 1
Contents
Contributors vii
Introduction ix
1 EconomicEvidenceinAntitrust:DefiningMarketsandMeasuringMarketPower 1
JonathanB.BakerandTimothyF.Bresnahan
2 UnilateralCompetitiveEffectsofHorizontalMergers 43
GregoryJ.WerdenandLukeM.Froeb
3 TheCoordinatedEffectsofMergers 105
Kai-UweKu¨hn
4 CompetitiveEffectsofVerticalIntegration 145
MichaelH.Riordan
5 AnalysisofConglomerateEffectsinEUMergerControl 183
DamienJ.Neven
6 DetectingCartels 213
JosephE.HarringtonJr.
7 LeniencyandWhistleblowersinAntitrust 259
GiancarloSpagnolo
8 FacilitatingPractices 305
PaoloBuccirossi
9 EconomicsofVerticalRestraints 353
PatrickReyandThibaudVerge´
vi Contents
10 ExclusiveContractsandVerticalRestraints:EmpiricalEvidenceandPublicPolicy 391
FrancineLafontaineandMargaretSlade
11 AbuseofMarketPower 415
JohnVickers
12 PriceDiscrimination 433
MarkArmstrong
13 PublicPolicyinNetworkIndustries 469
NicholasEconomides
14 CompetitionPolicyforIntellectualProperty 519
RichardJ.Gilbert
15 CompetitionPolicyinTwo-SidedMarkets,withaSpecialEmphasisonPayment
Cards 543
Jean-CharlesRochetandJeanTirole
16 CompetitionPolicyinAuctionsand‘‘BiddingMarkets’’ 583
PaulKlemperer
17 EuropeanStateAidControl:AnEconomicFramework 625
HansW.Friederiszick,Lars-HendrikRo¨ller,andVincentVerouden
Index 671
Contributors
MarkArmstrong,University College London GiancarloSpagnolo,University of Rome
atTor Vergataand Stockholm School of
JonathanB.Baker,American University
Economics
TimothyF.Bresnahan,Stanford University
JeanTirole,Toulouse University (IDEI-
PaoloBuccirossi, Lear (Laboratorio di
GREMAQ) and MIT
economia, antitrust,regolamentazione)
ThibaudVerge´,CREST-LEI
NicholasEconomides,New York University
VincentVerouden, Chief Economist Team
HansW.Friederiszick, European Schoolof
of the European Commission, Directorate-
Management and Technology, Berlin
General for Competition
LukeM.Froeb,Vanderbilt University
JohnVickers,Oxford University
RichardJ.Gilbert,University of California
GregoryJ.Werden,US Department of
at Berkeley
Justice
JosephE.HarringtonJr., Johns Hopkins
University
PaulKlemperer, Oxford University and UK
Competition Commission
Kai-UweKu¨hn, University of Michigan
FrancineLafontaine,University ofMichigan
DamienJ.Neven, Graduate Institute of
International Studies,Geneva, and DG
Competition of the European Commision
PatrickRey,Toulouse University (IDEI-
GREMAQ)
MichaelH.Riordan,Columbia University
Jean-CharlesRochet, Toulouse University
(IDEI-GREMAQ)
Lars-HendrikRo¨ller,European Schoolof
Management and Technology, Berlin and
Humboldt University
MargaretSlade,University of Warwick

Introduction
PaoloBuccirossi
Economics lies at the heart of competition, or antitrust, law. While in the early days the
application of antitrust rules was almost entirely left to the wit of people with only a legal
background,itisnowwidelyacceptedthattheproperinterpretationoftheserulesrequires
an understanding of how markets work and of how firms can alter their e‰cient function-
ing. This knowledge is the realm of economic science. Asthe awareness of the central role
of economics in antitrust has progressed, so has the research. An industrial economist
would probably say that the growth in the demand for economic knowledge coming from
administrative bodies, courts, companies, and lawyers (in short, the antitrust community)
has ledto a reorganization of the industry, with asharp increase in the supply of newthe-
oretical models and more reliable empirical methods. This reorganization has taken place
mostly over the last twenty years or so, and has significantly changed the landscape. Now
seemstheappropriatetimetoprovidetheantitrustcommunity,whichrecognizestheecon-
omist as one of its members, with an updated map of the territory. This Handbook serves
thispurpose.
DifferentJurisdictions,SameEconomics:AimsandScopeoftheHandbook
Not all jurisdictions have experienced an increase in the use of economics with the same
intensity, rapidity, and scope, and some may still lag behind. The essays contained in this
Handbook relate the economic theory to the application of competition, or antitrust, law
mostly in two jurisdictions: the United States and the European Union. Between these
two jurisdictions, there are nevertheless important di¤erences in the way competition, or
antitrust, rules are interpreted and applied. Even the name that identifies the relevant leg-
islationdi¤ers:intheUnitedStatesitisgenerallyreferredtoas‘‘antitrustlaw,’’whereasin
the European Union it is normally referred to as ‘‘competition law.’’ In this Handbook
both terms are used interchangeably, and the choice of the title does not express a bias in
favor of the United States.1 It rather advocates the opinion that for the subject matter of
thisvolumethemanyandnotabledi¤erencesbetweenthesetwojurisdictions(andbetween
themand all those that are not cited) are not pertinent.This idea needs to be explained.