Working Paper: NBER ID: w21167
Authors: Louis Kaplow
Abstract: Market definition and market power are central features of competition law and practice but pose serious challenges. On one hand, market definition suffers decisive logical infirmities that render it infeasible, unnecessary, and counterproductive, and the practice of stating market power requirements as market share threshold tests is incoherent as a matter of empirics and policy. On the other hand, market power is often probative of the desirability of liability, yet the typically assumed functional relationship is unexplored and often implausible. These latter deficiencies are addressed through a ground-up analysis of the channels by which market power can be relevant. It is important to explicitly and simultaneously consider both anticompetitive and procompetitive explanations for challenged practices and to attend to the magnitudes of the social consequences of correct and mistaken imposition of liability in order to identify the various ways and senses in which market power bears on optimal decision-making.
Keywords: No keywords provided
JEL Codes: D42; K21; L12; L40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market definition (G10) | Market power (L11) |
| Market power (L11) | Undesirability of actions (D81) |
| Market power (L11) | Social harm from anticompetitive practices (L41) |
| Market power (L11) | Social loss from mistaken liability imposition (K13) |
| Market shares (L17) | Market power (L11) |