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Flawed Economic Models have Misled RPM Policy in the US, Canada and the EU

By  |  November 12, 2013

Posted by D. Daniel Sokol

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    Tarcisio da Graca (Universite du Quebec (Outaouais)) and Robert Masson (Cornell University) argue Flawed Economic Models have Misled RPM Policy in the US, Canada and the EU

    ABSTRACT: We show that some influential literature supporting the RPM efficiency view is flawed when it relies on the presale service justification for RPM. In particular we consider presale services that do not modify in use value of a good, what we term sterile services. We debunk what we call the Bork proposition, using Bork¹s own assumptions except one. Specifically Bork does not consider the fact that value in use may differ from prepurchase perceived value in use. We apply the value-in-use standard which exposes the loss in consumer surplus in Bork’s model and reveals that even Bork¹s dissenters significantly underestimate their calculated losses to inframarginal consumers When consumer surplus is the antitrust/competition policy standard, our results suggest that a rule of reason regime in which competition/antitrust authorities or consumer protection agencies bear the burden of proof is inferior to a per se regime.