Recent literature has shown that when retailers cannot observe contracts between a manufacturer and their rivals, the manufacturer will be unable to obtain the vertically integrated profit using two-part tariff contracts alone. It has been suggested that vertical restraints, such as RPM and exclusive territories, are observable and thus permit the manufacturer to obtain profits closer to the vertically integrated level. Observability, however, is not sufficient. To serve as a strategic commitment mechanism, a vertical contract must be enforceable as well. We show that the vertical contracts...

This book combines state-level data on trucking rates with information on state-level regulations to estimate the independent effect on rates from three different types of motor carrier regulations: rate regulation; entry regulation; and the provision of antitrust immunity for decisions made jointly by motor carrier rate bureaus. The empirical results indicate that state-level motor carrier regulations generally increase trucking rates, with entry regulation having the largest effect in the LTL (less-than-truckload) sector and rate regulation having the largest effect in the TL (truckload)...

This study presents an analysis of the merger decisions between 1982-1992. The survey of cases suggests that the plaintiffs win roughly half the time. Plaintiffs were no more likely to win if a case was heard by a judicial panel dominated by Republican than Democratic appointees. In addition, the plaintiffs were no more likely to win in the second half of the decade than in the first half of the period. Further analysis suggests that barriers to entry and various competitive factors supplement the Herfindahl statistic in predicting the outcome of the case. Additional models link barrier and...

With perfect information about relevant strategic variables, economic theory predicts that firms engaged in competition across several markets sometimes can use their multimarket contact to blunt competitive forces. In practice, perfect information likely is not available, and it is well known that the existence of imperfect information can impede firms' collusive efforts. I extend a standard oligopoly supergame to examine simultaneously the effects of imperfect information and multimarket contact on the degree of cooperation that firms can sustain, and I reach the following conclusions....

By permitting firms to have different entry costs, I generalize two previously studied models of two-stage entry and pricing amongst Bertrand competitors. I find that the existing results depend critically on the symmetry assumption. For example, if firms' entry decisions are observed before price-setting occurs, then total welfare can increase following the introduction of a potential entrant, in contrast to the unambiguous welfare reduction found in the symmetric setting. If firms' entry decisions are unobserved before pricing-setting occurs, then the expected price typically decreases or...

Analyses of general acute care hospital mergers have traditionally defined the relevant product market as inpatient medical and surgical acute care and have generally assumed that economies of scale exist at least up to 100 beds. However, an examination of recent entry into California suggests that antitrust authorities should reconsider these two positions. First, twenty-one of the thirty-five general acute care hospitals that have recently opened or plan to open soon have fewer than 100 beds. Some of these hospitals are entering urban and suburban areas in which they must compete with...

Industrial organization issues that are relevant to antitrust have been studied in the laboratory for over three decades, and the results of this research offer useful insights for applied work in antitrust. Experimental methods provide a means for enhancing our understanding of markets. Those who advocate the relevance (or policy application) of a particular theory bear the burden of showing why the theory is appropriate. When a theory fails to predict well in a simple laboratory setting under conditions the theory itself suggests, it is difficult to believe that it would predict better in a...

This book models the reaction of firms to Federal Trade Commission (FTC) decisions to seek to block proposed horizontal mergers. Finns' responses to the FTC are shown to depend on a number of factors, including the structural merits of the FTC challenge, the efficiencies potentially arising from the transaction, and the cost to the firms of fighting the FTC in court. For a large number of the FTC's merger challenges, we find that firms have strong incentives to settle with the Commission, regardless of the cases' competitive merits. Therefore, in these matters the Commission appears to have...