This collection presents a new feature to the CPI online site: Point/Counterpoint. Competition policy has never been a stagnant field, but recent economic conditions along with increasing globalization have brought into question accepted practices and standard wisdom. By publishing responses to previously published articles, we look to encourage and forward thoughtful discussion on important and timely antitrust topics.
For our first issue, Joseph Farrell, (Director, Bureau of Economics, Federal Trade Commission) and Carl Shapiro, ( Deputy Assistant Attorney General for Economics in the Antitrust Division of the Department of Justice) responds to two papers presented in our December Symposium on rewriting the Merger Guidelines.
Richard Schmalensee’s Should New Merger Guidelines Give UPP Market Definition? took a look at Farrell & Shapiro’s, Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition. This paper presents a simple measure of the upward pricing pressure (“UPP”) that results from a merger between firms selling differentiated products and discussed whether this measure should be used as an indicator of the merger’s likely unilateral effects.
Malcolm Coate & Joseph Simons, in Critical Loss vs. Diversion Analysis, addressed ideas from Farrell & Shapiro’s Critical Loss Analysis. This paper discusses whether, in markets with differentiated products, the economics underlying critical loss analysis could instructively be illustrated by asking whether just two products form a relevant market under the Guidelines’ hypothetical monopolist test.
With new merger guidelines on the close horizon, debate can only help produce a constructive analysis. We hope that our Point/Counterpoint feature will help frame that debate for this and other future topics.
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