9780262220750

Economics Of Regulation And Antitrust

by
  • ISBN13:

    9780262220750

  • ISBN10:

    026222075X

  • Edition: 4th
  • Format: Hardcover
  • Copyright: 9/1/2005
  • Publisher: Mit Pr

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Summary

This new edition of the leading text on business and government focuses on the insights economic reasoning can provide in analyzing regulatory and antitrust issues. Departing from the traditional emphasis on institutions, Economics of Regulation and Antitrustasks how economic theory and empirical analyses can illuminate the character of market operation and the role for government action and brings new developments in theory and empirical methodology to bear on these questions. The fourth edition has been substantially revised and updated throughout, with new material added and extended discussion of many topics. Part I, on antitrust, has been given a major revision to reflect advances in economic theory and recent antitrust cases, including the case against Microsoft and the Supreme Court's Kodak decision. Part II, on economic regulation, updates its treatment of the restructuring and deregulation of the telecommunications and electric power industries, and includes an analysis of what went wrong in the California energy market in 2000 and 2001. Part III, on social regulation, now includes increased discussion of risk-risk analysis and extensive changes to its discussion of environmental regulation. The many case studies included provide students not only pertinent insights for today but also the economic tools to analyze the implications of regulations and antitrust policies in the future. The book is suitable for use in a wide range of courses in business, law, and public policy, for undergraduates as well at the graduate level. The structure of the book allows instructors to combine the chapters in various ways according to their needs. Presentation of more advanced material is self-contained. Each chapter concludes with questions and problems.

Table of Contents

Preface to the Fourth Edition xvii
Introduction
1(12)
The Rationale for Regulation and Antitrust Policies
2(1)
Antitrust Regulation
3(2)
The Changing Character of Antitrust Issues
4(1)
Reasoning behind Antitrust Regulations
5(1)
Economic Regulation
5(3)
Development of Economic Regulation
6(1)
Factors in Setting Rate Regulations
6(2)
Health, Safety, and Environmental Regulation
8(1)
Role of the Courts
9(1)
Criteria for Assessment
9(2)
Questions and Problems
11(1)
Recommended Reading
11(1)
Appendix
11(2)
The Making of a Regulation
13(46)
State versus Federal Regulation: The Federalism Debate
14(5)
Advantages of Federalism
15(1)
Advantages of National Regulations
16(1)
Product Labeling Example
17(1)
The Overlap of State and Federal Regulations
18(1)
The Character of the Rulemaking Process
19(5)
The Chronology of New Regulations
19(5)
Nature of the Regulatory Oversight Process
24(12)
The Nixon and Ford Administrations
24(1)
The Carter Administration
25(2)
The Reagan Administration
27(1)
The Bush Administration
28(1)
The Clinton Administration
28(1)
The George W. Bush Administration
28(1)
Regulatory Reform Legislation
28(2)
Benefit-Cost Analysis
30(3)
Discounting Deferred Effects
33(1)
Present Value
34(2)
The Criteria Applied in the Oversight Process
36(3)
Regulatory Success Stories
36(1)
Promotion of Cost-Effective Regulation
37(1)
Distortion of Benefit and Cost Estimates
38(1)
The Regulatory Role of Price and Quality
39(1)
The Impact of the Oversight Process
39(9)
The Cost of Regulation
40(1)
Other Measures of the Size of Regulation
40(5)
The Character of Regulatory Oversight Actions
45(3)
What Do Regulators Maximize?
48(3)
The Capture Theory
48(1)
Other Theories of Influence Patterns
49(1)
Comprehensive Models of Regulatory Objectives
49(2)
Conclusion
51(1)
Questions and Problems
51(1)
Appendix: Trends in Regulatory Agency Budgets and Staff
52(7)
I ANTITRUST
59(296)
Introduction to Antitrust
61(18)
Industrial Organization
62(7)
Structure
63(3)
Conduct
66(1)
Performance
66(2)
Government
68(1)
Antitrust
69(7)
Federal Antitrust Laws
69(2)
Enforcement and Remedies
71(4)
Exemptions from Antitrust
75(1)
Summary and Overview of Part I
76(1)
Appendix: Antitrust Statutes
76(3)
Sherman Act
76(1)
Clayton Act
77(1)
Federal Trade Commission Act
78(1)
Efficiency and Technical Progress
79(22)
Economic Efficiency
79(14)
Partial Equilibrium Welfare Tools
80(2)
Monopoly-versus-Competition Example
82(2)
Oil Industry Application
84(1)
Some Complications
85(3)
X-Inefficiency
88(1)
Monopoly-Induced Waste
89(1)
Estimates of the Welfare Loss from Monopoly
90(3)
Technical Progress
93(5)
Importance of Technological Change
93(2)
A Model of R & D Rivalry
95(3)
Summary
98(1)
Questions and Problems
99(2)
Oligopoly, Collusion, and Antitrust
101(54)
Game Theory
101(5)
Example 1: Advertising Competition
101(2)
Example 2: Compatibility of Standards
103(1)
The Strategic Form of a Game
104(1)
Nash Equilibrium
105(1)
Oligopoly Theory
106(10)
The Cournot Solution
106(6)
Other Models of Oligopoly
112(1)
Product Differentiation
113(3)
Collusion
116(18)
A Theory of Collusion
117(4)
Challenges to Collusion
121(7)
Collusion in Practice
128(6)
Antitrust Law and Policy toward Price Fixing
134(16)
Economic Analysis of Legal Categories
135(2)
Per Se Rule Cases
137(3)
Tacit Collusion
140(4)
Enforcement Policy
144(6)
Summary
150(1)
Questions and Problems
151(2)
Appendix
153(2)
Game Theory: Formal Definitions
153(2)
Market Structure and Strategic Competition
155(48)
Market Structure
155(19)
Concentration
155(7)
Scale Economies
162(2)
Entry Conditions
164(10)
Dominant Firm Theory
174(8)
Static Analysis
174(3)
Dynamic Analysis: Limit Pricing
177(5)
Strategic Competition
182(12)
Limit Pricing
183(7)
Investment in Cost-Reducing Capital
190(4)
Raising Rivals' Costs
194(1)
Preemption and Brand Proliferation
194(4)
Summary
198(1)
Questions and Problems
198(5)
Mergers
203(32)
Antitrust Laws and Merger Trends
204(3)
Reasons for Mergers
207(3)
Monopoly
207(1)
Economies
207(1)
Reducing Management Inefficiencies
208(2)
Horizontal Mergers
210(19)
Benefits and Costs
210(9)
Effects of Airline Mergers
219(1)
Cases
220(5)
U.S. Department of Justice Merger Guidelines
225(4)
Conglomerate Mergers
229(3)
Potential Benefits
229(1)
Anticompetitive Effects and Cases
230(2)
Summary
232(1)
Questions and Problems
233(2)
Vertical Mergers and Vertical Restraints
235(58)
Vertical Mergers
236(21)
Benefits
237(4)
Anticompetitive Effects
241(5)
Commitment and the Restoration of Market Power
246(2)
Raising Rivals' Costs
248(5)
Antitrust Law and Policy
253(1)
Historical Development
254(1)
Time Warner and Turner
255(2)
Vertical Restraints
257(31)
Exclusive Dealing
258(5)
Antitrust Law and Policy
263(3)
Tying
266(9)
Modern Theories of Leveraging
275(7)
Manufacturer-Retailer Restraints
282(6)
Summary
288(1)
Questions and Problems
289(4)
Monopolization and Price Discrimination
293(62)
Establishing Monopolization Claims
294(5)
Measuring Monopoly Power
294(4)
Assessing Intent to Monopolize
298(1)
Development of Antitrust Case Law
299(6)
1890--1940: Standard Oil and United States Steel
299(1)
1940--1970: Alcoa and United Shoe Machinery
300(3)
1970 to Present: Kodak, IBM, Microsoft, and Others
303(2)
Predatory Pricing
305(17)
Theories of Predatory Pricing
309(7)
Efficiency Rationales
316(1)
Antitrust Policy
317(1)
The Areeda-Turner Rule and Other Single-Parameter Rules
317(2)
The Brooke Case and the Two-Tier Rule
319(2)
Recent Developments
321(1)
Refusal to Deal and the Essential Facilities Doctrine
322(10)
Essential Facilities Doctrine
323(1)
Intellectual Property Rights
324(2)
Kodak and Monopoly Power in Aftermarkets
326(6)
Microsoft Case
332(11)
Network Externalities
332(4)
Antitrust Case
336(2)
Tying and Monopolization of the Browser Market
338(1)
Maintenance of Monopoly in the Operating Systems Market
339(3)
Remedies and Harm
342(1)
Price Discrimination and the Robinson-Patman Act
343(9)
Systematic Discrimination
344(5)
Unsystematic Discrimination
349(1)
Cases
350(2)
Summary
352(1)
Questions and Problems
352(3)
II ECONOMIC REGULATION
355(334)
Introduction to Economic Regulation
357(44)
What Is Economic Regulation?
357(1)
Instruments of Regulation
358(4)
Control of Price
358(1)
Control of Quantity
359(1)
Control of Entry and Exit
359(1)
Control of Other Variables
360(2)
Brief History of Economic Regulation
362(7)
Formative Stages
362(2)
Trends in Regulation
364(5)
The Regulatory Process
369(6)
Overview of the Regulatory Process
369(2)
Regulatory Legislation
371(1)
Independent Regulatory Commissions
371(2)
Regulatory Procedures
373(2)
The Theory of Regulation
375(21)
Normative Analysis as a Positive Theory
376(3)
Capture Theory
379(1)
Economic Theory of Regulation
380(12)
Testing Theories of Regulation
392(4)
Summary and Overview of Part II
396(1)
Appendix
397(2)
A Theory of Interest Group Competition
397(2)
Questions and Problems
399(2)
Theory of Natural Monopoly
401(28)
The Natural Monopoly Problem
401(7)
Permanent and Temporary Natural Monopoly
402(2)
Subadditivity and Multiproduct Monopoly
404(4)
Alternative Policy Solutions
408(15)
Ideal Pricing
409(12)
Franchise Bidding
421(1)
Actual Solutions
421(2)
Summary
423(1)
Appendix
423(2)
The Troublesome Case of a Natural Monopoly
423(2)
Questions and Problems
425(4)
Natural Monopoly Regulation and Electric Power
429(36)
Traditional Rate-of-Return Regulation
430(6)
The Rate Case
431(2)
Averch-Johnson Effect
433(3)
Incentive Regulation
436(7)
Performance Standards
436(1)
Earnings Sharings
437(2)
Price Caps
439(3)
Yardstick Regulation
442(1)
Rate Structure
443(4)
FDC Pricing
443(2)
Undue Discrimination
445(2)
Peak-Load Pricing
447(6)
Costs of Power Production
447(2)
Peak-Load Pricing Model
449(4)
Regulation and Restructuring of Electric Power
453(8)
Historical, Technological, and Regulatory Background
453(2)
Overview of Recent Legislation
455(1)
Restructuring in California
456(5)
Summary
461(1)
Questions and Problems
462(3)
Franchise Bidding and Cable Television
465(38)
Theory of Franchise Bidding
465(14)
Competition at the Bidding Stage
467(8)
Contractual Arrangements for the Postbidding Stage
475(3)
Assessment of Franchise Bidding
478(1)
Cable Television
479(20)
Historical/Regulatory Background
480(1)
Cable Television as a Natural Monopoly
481(4)
Franchising Process
485(2)
Assessment of Franchise Bidding
487(5)
Rate Regulation
492(5)
Is There a Role for Government Intervention?
497(2)
Summary
499(1)
Questions and Problems
500(3)
Public Enterprise
503(20)
General Background
504(1)
Positive Theory of Public Enterprise
505(7)
Managerial Model of a Firm
506(1)
Managerial Model of a Private Enterprise
507(1)
Managerial Model of a Public Enterprise
508(2)
Comparison of Public and Private Enterprise
510(2)
Municipal Electric Utilities
512(4)
Pricing Behavior
512(1)
Allocative Efficiency Comparison
513(2)
Productive Efficiency Comparison
515(1)
Assessment of Private versus Public Utilities
515(1)
Airlines
516(1)
Privatization
517(4)
Summary
521(1)
Questions and Problems
522(1)
Dynamic Issues in Natural Monopoly Regulation: Telecommunications
523(32)
Transformation of a Natural Monopoly
523(21)
Basis for Natural Monopoly Regulation
524(3)
Sources of Natural Monopoly Transformation
527(2)
Regulatory Response
529(5)
Intercity Telecommunications Market
534(10)
Telecommunications Act of 1996
544(2)
Separation of Regulated Monopolies and Competitive Markets
546(5)
Benefits and Costs of Separation
547(3)
Breakup of AT&T
550(1)
Summary
551(2)
Questions and Problems
553(2)
The Regulation of Potentially Competitive Markets: Theory and Estimation Methods
555(34)
Theory of Price and Entry/Exit Regulation
556(16)
Direct Effects of Price and Entry/Exit Regulation: The Competitive Model
556(4)
Direct Effects of Price and Entry/Exit Regulation: The Imperfectly Competitive Model
560(4)
Indirect Effects of Price and Entry Regulation
564(3)
Some Indirect Effects of Price and Exit Regulation
567(1)
Regulation and Innovation
568(4)
Methods for Estimating the Effects of Regulation
572(11)
Overview of Estimation Methods
572(1)
Intertemporal Approach
572(2)
Application: New York Stock Exchange
574(1)
Intermarket Approach
575(1)
Application: Advertising of Eyeglasses
576(2)
Application: 44 Liquormart Decision
578(1)
Counterfactual Approach
578(1)
Application: State Usury Laws
579(4)
Measuring the Return to Price and Entry Restrictions: Taxicab Regulation
583(2)
Summary
585(2)
Questions and Problems
587(2)
Economic Regulation of Transportation: Surface Freight and Airlines
589(52)
Transportation Industry
589(2)
Surface Freight Transportation
591(18)
Regulatory History
591(4)
Description of Regulatory Practices
595(2)
Effects of Regulation
597(12)
Airlines
609(30)
Regulatory History
609(2)
Description of Regulatory Practices
611(1)
Effects of Regulation
612(13)
Competition and Antitrust Policy after Deregulation
625(13)
Lessons from Regulation and Deregulation
638(1)
Summary
639(1)
Questions and Problems
640(1)
Economic Regulation of Energy: Crude Oil and Natural Gas
641(48)
The Theory of Price Ceilings
642(4)
Price and Quantity Regulation of the Crude Oil Industry
646(5)
Regulatory History
648(3)
Oil Prorationing
651(8)
Regulatory Practices
651(1)
Rationale for Prorationing
651(5)
Solutions to the Common Pool Problem
656(1)
Effects of Prorationing
657(2)
Mandatory Oil Import Program
659(2)
Regulatory Practices
659(1)
Effects of Regulation
659(2)
Crude Oil Price Controls
661(10)
Regulatory Practices
661(2)
Effects of Price Regulation
663(8)
Price Regulation of the Natural Gas Industry
671(14)
Regulatory History
672(1)
Regulatory Practices
673(2)
Effects of Price Regulation
675(8)
Transition from Regulation to Markets in the Transmission of Natural Gas
683(2)
Summary
685(1)
Questions and Problems
686(3)
III HEALTH, SAFETY, AND ENVIRONMENTAL REGULATION
689(214)
Introduction: The Emergence of Health, Safety, and Environmental Regulation
691(26)
Risk in Perspective
692(3)
Measuring Mortality Risks
694(1)
The Infeasibility of a No-Risk Society
695(8)
Homeland Security
696(3)
Wealth and Risk
699(1)
Irrationality and Biases in Risk Perception
700(3)
Policy Evaluation
703(4)
Regulatory Standards
704(1)
Benefit-Cost Analysis
704(1)
The Role of Heterogeneity
705(2)
Uncertainty and Conservatism
707(2)
The Role of Risk Ambiguity
707(2)
The Role of Political Factors
709(4)
Economic Models of Environmental Policies
709(2)
Voting Patterns
711(2)
Summary and Overview of Part III
713(1)
Questions and Problems
714(1)
Recommended Reading
715(2)
Valuing Life and Other Nonmonetary Benefits
717(28)
Policy Evaluation Principles
718(2)
Willingness-to-Pay versus Other Approaches
720(3)
Variations in the Value of Statistical Life
723(2)
The Labor Market Model
725(5)
Empirical Estimates of the Value of Life
730(1)
Value of Risks to Life for Regulatory Policies
731(5)
Survey Approaches to Valuing Policy Effects
736(3)
Valuation of Air Quality
738(1)
Exploratory Nature of the Survey Approach
738(1)
Sensitivity Analysis and Cost-Effectiveness
739(1)
Risk-Risk Analysis
740(2)
Establishing Prices for Health, Safety, and Environmental Regulation
742(1)
Questions and Problems
742(3)
Environmental Regulation
745(44)
The Coase Theorem for Externalities
746(11)
The Coase Theorem as a Bargaining Game
747(1)
A Pollution Example
748(2)
Long-Run Efficiency Concerns
750(1)
Transaction Costs and Other Problems
750(1)
Smoking Externalities
751(3)
Special Features of Environmental Contexts
754(2)
Siting Nuclear Wastes
756(1)
Selecting the Optimal Policy: Standards versus Fines
757(8)
Setting the Pollution Tax
758(2)
The Role of Heterogeneity
760(1)
The Role of Uncertainty
761(2)
Pollution Taxes
763(1)
Cost Heterogeneity for Water Pollution Control
764(1)
Current Market Trading Policies
765(4)
The Future of Market Approaches
768(1)
Global Warming and Irreversible Environmental Effects
769(3)
Assessing the Merits of Global Warming Policies
769(2)
How Should We React to Uncertainty?
771(1)
Multiperson Decisions and Group Externalities
772(3)
The Prisoner's Dilemma
772(1)
The N-Person Prisoner's Dilemma
773(1)
Applications of the Prisoner's Dilemma
774(1)
The Enforcement and Performance of Environmental Regulation
775(10)
Enforcement Options and Consequences
775(1)
Hazardous Wastes
776(3)
Contingent Valuation for the Exxon Valdez Oil Spill
779(3)
The Senior Discount for the Value of Life
782(1)
Evaluating Performance
783(2)
Summary
785(1)
Questions and Problems
786(3)
Product Safety
789(38)
Emergence of Product Safety Regulations
789(1)
Current Safety Decisions
790(2)
Changing Emphasis of Product Regulation
792(1)
Premanufacturing Screening: The Case of Pharmaceuticals
793(5)
Weighing the Significance of Side Effects
794(1)
Drug Approval Strategies
794(4)
The Behavioral Response to Product Safety Regulation
798(6)
Consumer's Potential for Muting Safety Device Benefits
801(3)
The Costs of Product Safety Regulation: The Automobile Industry Case
804(4)
Trends in Motor Vehicle and Home Accident Deaths
808(2)
Accident Rate Influences
809(1)
The Decline of Accident Rates
809(1)
The Rise of Product Liability
810(6)
The Negligence Standard
812(1)
The Strict Liability Standard
813(1)
The Ford Pinto Case
813(2)
Escalation of Damages
815(1)
Risk Information and Hazard Warnings
816(2)
Self-Certification of Safe Products
817(1)
Government Determination of Safety
818(1)
Alternatives to Direct Command and Control Regulation
818(2)
Regulation through Litigation
820(3)
Breast Implant Litigation and Regulation
821(2)
The Future of Product Safety Policy
823(2)
Questions and Problems
825(2)
Regulation of Workplace Health and Safety
827(38)
The Potential for Inefficiencies
829(1)
How Markets Can Promote Safety
829(2)
Compensating Wage Differential Theory
831(2)
Risk Information
833(2)
On-the-Job Experience and Worker Quit Rates
835(1)
Inadequacies in the Market
836(2)
Externalities
838(1)
OSHA's Regulatory Approach
838(13)
Setting OSHA Standard Levels
839(2)
The Nature of OSHA Standards
841(2)
The Reform of OSHA Standards
843(1)
Regulatory Reform Initiatives
843(1)
Changes in OSHA Standards
843(4)
OSHA's Enforcement Strategy
847(1)
Inspection Policies
848(1)
Trivial Violations
849(1)
OSHA Penalties
849(1)
Enforcement Targeting
850(1)
The Impact of OSHA Enforcement on Worker Safety
851(9)
OSHA Regulations in Different Situations
852(2)
OSHA and Other Factors Affecting Injuries
854(6)
The Role of Workers' Compensation
860(1)
Agenda for Policy Reform Efforts
861(2)
Questions and Problems
863(2)
Patents and Pharmaceuticals
865(38)
Economics of Invention and Patents
865(16)
Background on Patents
867(1)
Incentives to Invent: Monopoly versus Competition
868(4)
Welfare Analysis of Patents
872(9)
Pharmaceuticals and the Role of Patents
881(18)
Industry Structure
881(10)
The 1984 Drug Price Competition and Patent Restoration Act
891(3)
Other Policies That Affect R&D Incentives
894(5)
Summary
899(1)
Questions and Problems
899(4)
Author Index 903(6)
Subject Index 909

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