11: Monopoly and Antitrust Policy
- Page ID
- 181243
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 11.0: Introduction
- This page discusses corporate mergers in the natural gas and telecommunications sectors, focusing on the Kinder Morgan-El Paso and AT&T-BellSouth mergers. It examines the balance between economies of scale and competition, raising concerns about the potential for oligopolies. The chapter questions government regulation of anticompetitive behavior and explores the challenges in determining when to allow or block mergers, particularly concerning natural monopolies.
- 11.1: Corporate Mergers
- This page highlights the significant effects of mergers and acquisitions on competition and the critical role of antitrust laws in regulating them. While tools like the four-firm concentration ratio and Herfindahl-Hirschman Index (HHI) assess market concentration, their limitations are noted, prompting the FTC to favor more nuanced, case-by-case analyses.
- 11.2: Regulating Anticompetitive Behavior
- This page discusses U.S. antitrust laws, focusing on their role in combating anticompetitive practices like cartels and price fixing, as well as specific examples, including Microsoft's monopolistic strategies. It emphasizes the complexities and evolving challenges of antitrust regulations in defining acceptable practices while promoting fair competition.
- 11.3: Regulating Natural Monopolies
- This page discusses the complexities of regulating natural monopolies, particularly public utilities in the U.S., where one firm can supply the market more efficiently. It explores regulatory options, including unregulated monopolies, splitting firms, and price regulations, specifically contrasting cost-plus and price cap methods. The latter, used in the 1980s and 1990s, could incentivize efficiency but required careful setting to avoid unrealistic expectations.
- 11.4: The Great Deregulation Experiment
- This page explores the complexities of price regulation and antitrust policy in the U.S., particularly in the airline industry post-deregulation. It highlights regulatory capture, where firms exploit regulations for their benefit, and contrasts the benefits of deregulation—lower airfares and enhanced competition—with drawbacks like bankruptcies and job losses.
- 11.5: Key Terms
- This page outlines key concepts of market structures and regulations, including acquisition, antitrust laws, and bundling. It explains tools for measuring monopoly power, such as concentration ratios and the Herfindahl-Hirschman Index (HHI). Regulatory practices discussed include cost-plus and price cap regulations, as well as minimum resale price maintenance.
- 11.6: Key Concepts and Summary
- This page discusses corporate mergers and acquisitions, emphasizing the role of antitrust laws in maintaining competition. It explains how market competition is assessed using concentration ratios and the Herfindahl-Hirschman Index (HHI). The page highlights the monitoring of anticompetitive behaviors and the regulation of natural monopolies like utilities.
- 11.7: Self-Check Questions
- This page covers questions about market concentration, antitrust regulations, and mergers, highlighting their impact on concentration metrics like the four-firm ratio and Herfindahl-Hirschman Index. It contrasts these measures, analyzes companies' preferred market definitions, and discusses the globalization effects on these definitions.
- 11.8: Review Questions
- This page covers corporate mergers, acquisitions, and antitrust policies, focusing on market concentration measurement through the four-firm concentration ratio and Herfindahl-Hirschman Index. It discusses practices such as minimum resale price maintenance, exclusive dealing, tie-in sales, and predatory pricing, analyzing their effects on competition and permissibility.
- 11.9: Critical Thinking Questions
- This page explores competition and market structures through various lenses, including concentration measures, industry competition evidence, predatory pricing, and market entry barriers. It discusses the shift towards monopolized urban transit systems, reasons for subsidies, and the effects of deregulation in the airline industry. Finally, it raises questions about the effectiveness of government regulation in curbing misconduct and emphasizes the necessity for continuous regulatory adaptation.
- 11.10: Problems
- This page analyzes the U.S. auto market through metrics like the four-firm concentration ratio and the Herfindahl-Hirschman Index to assess market concentration and the FTC's stance on a GM-Ford merger. It further explores output and pricing scenarios for a transit system under various regulations, including conditions of unregulated monopoly and allocative efficiency, as well as the subsidies necessary for efficient service delivery.