This paper offers a decision theoretic framework for analyzing tying law, and presents a critical assessment of post-Chicago tying theory. The decision theoretic framework takes into account the likelihood of judicial error in the application of rules and the costs of such error. We use the decision theoretic framework to assess the proper legal rules regarding tying and technological integration. Three general themes run throughout much of our analysis. First, the per se rule against tying simply has no economic foundation. Second, while the post-Chicago literature established the theoretical possibility of anticompetitive tying, one must know the frequency of anticompetitive tying to formulate a rational legal rule. Because beneficial tying is so pervasive, rules against tying could be harmful even with a small rate of "false convictions." Third, the most plausible post-Chicago theory of anticompetitive tying is based on the assumption that the tying and tied goods are complementary and that they are both susceptible to market power. However, the long-established principle that integrated complementary monopoly results in lower prices than independent complementary monopolies suggests that a policy biased toward independent complementary monopolies has the predictable consequence of reducing consumer welfare.
This paper discusses some of the similarities between work being done by economists and by computational physicists seeking to contribute to economics.We also mention some of the differences in the approaches taken and seek to justify these different approaches by developing the argument that by approaching the same problem from different points of view, new results might emerge.In particular, we review two such new results.Specifically, we discuss the two newly discovered scaling results that appear to be 'universal', in the sense that they hold for widely different economies as well as for different time periods: (i) the fluctuation of price changes of any stock market is characterized by a probability density function, which is a simple power law with exponent -4 extending over 10 2 standard deviations (a factor of 10 8 on the y-axis); this result is analogous to the Gutenberg-Richter power law describing the histogram of earthquakes of a given strength; (ii) for a wide range of economic organizations, the histogram that shows how size of organization is inversely correlated to fluctuations in size with an exponent ≈0.2.Neither of these two new empirical laws has a firm theoretical foundation.We also discuss results that are reminiscent of phase transitions in spin systems, where the divergent behaviour of the response function at the critical point (zero magnetic field) leads to large fluctuations.We discuss a curious 'symmetry breaking' for values of above a certain threshold value c ; here is defined to be the local first moment of the probability distribution of demand -the difference between the number of shares traded in buyer-initiated and seller-initiated trades.This feature is qualitatively identical to the behaviour of the probability density of the magnetization for fixed values of the inverse temperature.
This paper discusses alternative definitions of the terms upstream and downstream, and shows how each can be represented within a single model of complementary oligopoly. The different definitions have strikingly different implications for the effect of vertical mergers. While the correct definition is not obvious, the model implies an observable condition that determines the competitive effect of a vertical merger. This condition can be a guide to empirical studies of vertical mergers and integration. Copyright 1989 by Blackwell Publishing Ltd.
We model competitive bundling and tying, allowing for marginal cost savings from bundling, fixed costs of product offerings, and variation in customer preferences. Pure bundling can arise either because few people demand only one component or because, with high fixed costs, a single product efficiently satisfies customers with diverse tastes. We conclude by analyzing empirically the bundling of pain relievers with decongestants. The discount for the bundled product is large. We argue that our model provides a simpler, more compelling explanation for the size of the discount than the demand‐centered approach to bundling by a monopolist.
We examine the merits of competition cases brought against Google with respect to alleged search bias. The four key steps in a structured investigation into an alleged abuse of dominance/monopolization/unfair method of competition are:
By comparing the demand for a bundle and the vertical sum of the demands for its components, this article analyzes the profitability and welfare consequences of bundling. If it does not lower costs, bundling tends to be profitable when reservation values are negatively correlated and high relative to costs. If bundling lowers costs and costs are high relative to average reservation values, positively correlated reservation values increase the incentive to bundle. Bundling and charging a price equal to the sum of the components' prices lowers consumer surplus. Bundling can, however, increase consumer surplus when it results in lower prices. Copyright 1995 by University of Chicago Press.
