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Understanding Vertical Restraints in Antitrust Economics

Explore common vertical restraints in competition policy and their impact on buyers, sellers, and consumers. Learn about the Single-Monopoly Profit Theorem, tying practices, and examples like the European Commission case against Microsoft. Discover strategies to maximize consumer surplus and the shift from a per se to a rule of reason approach in antitrust economics.

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Understanding Vertical Restraints in Antitrust Economics

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  1. Antitrust Economics 2013 David S. Evans University of Chicago, Global Economics Group Elisa Mariscal CIDE, Global Economics Group Topic 14: Vertical Restraints Topic 14| Part 1 14 November 2013 Date

  2. Overview

  3. Vertical Restraints Overview

  4. Vertical Restraints Impose Conditions on the Actions of the Buyer or Seller

  5. Common Vertical Restraints Considered by Competition Policy

  6. Vertical Restraints Can Involve Downstream Firm or Final Customer

  7. Manufacturer Retailer Consumers Vertical Restraints can Involve Sale by Upstream Firm to Downstream Firm Upstream Downstream

  8. Key Competition Policy Issues

  9. Single-Monopoly Profit Theorem

  10. The Chicago Single Monopoly Profit Theorem

  11. Illustration of Single-Monopoly Profit Theorem

  12. Monopolist in A’s Best Strategy is to Enable Consumers to Get Product B at Lowest Cost

  13. Hilti AG v. EC Commission

  14. Single Monopoly Profit Theorem Not Necessarily True if Variable Proportions

  15. Tying

  16. “Tying” Involves Only Selling One Product with Another Product In each case the firm is limiting the ability of the consumer to choose the “tying good” (A) without getting the “tied good” (B) too.

  17. European Commission Case Against Microsoft Classic Tying Case

  18. Overview

  19. Some Common Examples of Tying

  20. Product Design and Bundles

  21. Better Products for Consumers

  22. Less Costly Products for Firms

  23. Tying Complementary Products

  24. Aggregating Demand and Cost Reductions

  25. Metering Demand for Durable Good

  26. Bundling to Get More Consumer Surplus “Block Booking Example” from Nobel Prize Winner George Stigler

  27. Extending Monopoly Into Secondary Market: Example 1

  28. Preventing Entry into Primary Monopoly: Example 2

  29. Critical Question: Does Firm Have Incentive and Ability to Foreclose?

  30. The Ability to Foreclose Rivals Is Limited

  31. Evolution of Tying From Very Bad to Usually Good

  32. Per Se Approach Could Prevent Good Tying

  33. Recommended Rule of Reason Approach

  34. End of Part 1, Next Class Part 2

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