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Slide 2 HT-1 How To Tutorial for the Powerpoint Instructional Slides CLICK ON THIS NAVIGATION BUTTON IF THIS IS YOUR FIRST USE OF THE TUTORIAL. Otherwise, use the Menu button at the left. Menu A NTITRUST L AW INTERPRETATION AND IMPLEMENTATION Goetz, McChesney & Lambert First Use Start Here First Use Start Here Slide 3 HT-2 Goetz & Lambert, 2013 How To Main Menu (Click on the Bulleted Hyperlinks) The Basics of Navigation Buttons The Basics of Navigation Buttons The Basics of Navigation Buttons The Basics of Navigation Buttons Using Hyperlinks for Browser-like Navigations Using Hyperlinks for Browser-like Navigations Using Hyperlinks for Browser-like Navigations Using Hyperlinks for Browser-like Navigations Animations: Slides that Do Something Interactively Animations: Slides that Do Something Interactively Animations: Slides that Do Something Interactively Animations: Slides that Do Something Interactively Using Hyperlinks in the Notes and Questions Using Hyperlinks in the Notes and Questions Using Hyperlinks in the Notes and Questions Using Hyperlinks in the Notes and Questions What Are the Numbers at the Screens Lower Left? What Are the Numbers at the Screens Lower Left? What Are the Numbers at the Screens Lower Left? What Are the Numbers at the Screens Lower Left? The Control Panel of Each File The Control Panel of Each File The Control Panel of Each File The Control Panel of Each File End Tutorial End Tutorial How You Can Test Yourself How You Can Test Yourself How You Can Test Yourself How You Can Test Yourself Plunging Right In: A Road Test Based on Ch. 1 Plunging Right In: A Road Test Based on Ch. 1 Plunging Right In: A Road Test Based on Ch. 1 Plunging Right In: A Road Test Based on Ch. 1 Click Here to Read This First Click Here to Read This First Click Here to Read This First Click Here to Read This First Slide 4 HT-3 Read This First Goetz & Lambert, 2013 These slide sets dont work exactly like what you might be used to in ordinary Powerpoint presentations. They use some technical tricks to make Law School classroom use smoother, more time-effective, and more flexible. Unless you are already familiar with the techniques used here, it is advisable to follow the Main Menu hyperlinks in the order in which they are listed. This slide presentation uses a subset of material based on Chapter 1 (we say based on because the demo is not quite the same as the current 5th editions Ch. 1 material.) The idea is that you can road test how the real stuff works. If you are considering using the real slides, it is very important that you first read the document entitled An Instructors Guide to Using The GML Slides, which is downloadable from the restricted Professors area of the gm- antitrustlaw.com support website. That website also is the source for the full sets of slides, chapter-by-chapter and section-by-section. When you have read the above, click on the Return navigation button in the lower right-hand corner. Return to Main Menu Slide 5 A NTITRUST L AW INTERPRETATION AND IMPLEMENTATION Copyright 2013, All Rights Reserved Statutes Session Marker Session Marker Assignments A - Law and Econ A - Law and Econ Countdown B - Overview Cases B - Overview Cases Announcements Multimedia Control Panel Intro The Control Panel slide of each file looks similar to this. Try each of the buttons to see what they do. (The greyed-out ones are disabled in this demo.) The Control Panel slide of each file looks similar to this. Try each of the buttons to see what they do. (The greyed-out ones are disabled in this demo.) WHEN YOU ARE DONE, CLICK HERE TO RETURN TO THE TUTORIALS MAIN MENU. WHEN YOU ARE DONE, CLICK HERE TO RETURN TO THE TUTORIALS MAIN MENU. Slide 6 HT-5 Goetz & Lambert, 2013 Plunging In: Test Yourself By now, you should know enough to get started using the slides. Theres no substitute for actual experience in moving around through one of these slide sets. So, the next step is to test yourself on a limited subset of the Chapter 1 material. Basically, the slides that you see will be the similar to the regular distribution set for Section B, i.e., Monopolization. To give just a little help, there will occasionally be prompts or other informational boxes that will appear on the screen. If you get lost or cant make something work, remember that you can always hit the Esc key to exit from the Powerpoint presentation. Then, if you want, you can use the main Menu to navigate here again and try to pick up where you went off the track Yes, Im Ready to Plunge In. Lets Go! Yes, Im Ready to Plunge In. Lets Go! Take Me Back to the Main Menu. Take Me Back to the Main Menu. Slide 7 HT-6 If you came here from the opening title slide, you have already used a navigation button. This is one of the ways of moving to another slide. Slide 8 HT-7 The right arrow button always triggers a move to the next slide. In many Powerpoint presentations, a mouse click will do the same thing. But not here. Try it! (We have good reasons for forcing the use of only navigation buttons.) Slide 9 HT-8 Other Kinds of Navigation Buttons Just as the right arrow button always triggers a move to the next slide, a left arrow button will move backwards one slide. (You probably ought to try it, then just navigate forward to get back to this present slide.) Continue Slide 10 HT-9 Other Kinds of Navigation Buttons There are several other kinds of navigation buttons in these slides. The first three below are slightly different types of go back where you just came from buttons. The last two are specific-location links. Link to some topic Link to some topic A home button will take you back to the beginning, normally the first slide in the file. Use it when you are done! A labeled button that takes you to a particular topical slide or sequence. (In this example, its a three-slide illustrative sequence. Try it, then come back here.) This simple go back button will redisplay the last slide viewed. (Try it, then come back here.) This more complex form of go back will take you back to a starting point that may not the last slide viewed but is a single known destination. Return Similar to the above, except a return button can return to more than one starting point. Slide 11 HT-10 Goetz & Lambert, 2013 First Slide Of A 3-Slide Sequence 1 Navigate around in the sequence, then use the return button to go back to where you came from in the How To tutorial. Return Slide 12 HT-11 Goetz & Lambert, 2013 Second Slide Of A 3-Slide Sequence 2 Navigate around in the sequence, then use the return button to go back to where you came from in the How To tutorial. Return Slide 13 HT-12 Goetz & Lambert, 2013 Third Slide Of A 3-Slide Sequence 3 Return Navigate around in the sequence, then use the return button to go back to where you came from in the How To tutorial. Slide 14 HT-13 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal ReasoningThe most powerful powerful way of navigating the slides is via hyperlinks. Although it is not obvious from just looking at this slide, each of the numbered items above is a hyperlink that takes you somewhere else in much the same fashion as a web browser does when you click on its links. Slide 15 HT-14 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal ReasoningMove the mouse cursor over each of the numbered lines. When the cursor is over a link, it changes shape, to a tiny hand. Try it now. (But do not actually click on any of the links.) Slide 16 HT-15 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal Reasoning When youre ready, click on the navigation button to continue. Slide 17 HT-16 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal ReasoningNow, lets actually use use some of the hyperlinks. A big advantage of hyperlinks is that you dont have to use them in the order that they appear or even use them at all if you want to skip that topic! Click on each of the links, in any order, and follow the directions to get back to this menu slide. Slide 18 HT-17 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal Reasoning AFTER YOU TEST EACH OF THE LINKS ABOVE, USE THIS NAVIGATION BUTTON TO TAKE YOU TO THE TUTORIALS NEXT SLIDE Slide 19 HT-18 There are two ways of getting back from here to the Menu. If you press the home button below, it will take you all the way back to the title slide of this tutorial. Then, you should select the Menu button on the left of the title slide. Instead, you can use the labeled button below that will take you directly to the Menu. The choice is yours; pick one and click! Goetz & Lambert, 2013 Using a Menu Slide You now know the fundamentals of both navigation buttons and hyperlinks. Therefore, its time to exploit this knowledge by using the same type of menu that is used in the actual slide sets. As you have already experienced, this tutorials Main Menu is a set of hyperlinks that correspond to various topics in this tutorial. By clicking on those hyperlinks, you can move directly to the indicated topics. You should do them in the sequence indicated. However, you have already done the first couple of topics. Therefore, you should start with the first uncovered topic. Menu Are you beginning to see that using the GML slides is similar to accessing a website with a browser? Instead, conventional Powerpoints are more like using a slide projector in lockstep order. Slide 20 HT-19 This is just a dummy hyperlink! If it were a real hyperlink, it would have taken you to the destination indicated on the hyperlinks label. In this case, youll just be automatically returned (in a few seconds) to the slide on which you clicked the hyperlink. Slide 21 HT-20 Goetz & Lambert, 2013 Animations Demo Menu Animation Used to Highlight Parts of an Exhibit Animation Used to Highlight Parts of an Exhibit Animation Used to Highlight Parts of an Exhibit Animation Used to Highlight Parts of an Exhibit [Remember, the bulleted items in this menu are clickable hyperlinks.] Animation Used to Highlight Words or Phrases in a Case or Statute Animation Used to Highlight Words or Phrases in a Case or Statute Animation Used to Highlight Words or Phrases in a Case or Statute Animation Used to Highlight Words or Phrases in a Case or Statute Animation Used to Display a Bulleted List of Points to be (Possibly) Discussed Animation Used to Display a Bulleted List of Points to be (Possibly) Discussed Animation Used to Display a Bulleted List of Points to be (Possibly) Discussed Animation Used to Display a Bulleted List of Points to be (Possibly) Discussed Return button takes you back to the Main Menu Multiple Animation Slides Used to Create a Diagram or Graphic and Explain It Multiple Animation Slides Used to Create a Diagram or Graphic and Explain It Multiple Animation Slides Used to Create a Diagram or Graphic and Explain It Multiple Animation Slides Used to Create a Diagram or Graphic and Explain It Bear in mind the rules for using a slide with animations: If there is no navigation button visible, then the slide is waiting for a click to advance to the next animation step. Once the navigation button appears, the current slides animation is done and the button will take you to the next slide in the sequence (or return you to the calling menu). Slide 22 HT-21 Goetz & Lambert, 2013 Numbers in the Lower-left Corner of the Screen The number that you see has two parts. The prefix identifies the Powerpoint file that is being used. Usually, this prefix is descriptive; e.g., the present file is HT because this is the How To slide set. The number tells you which slide number in the set is being displayed. And what are the numbers good for. Several things. First, they can be used for direct access navigation by, during a slide show, typing in a slide number and pressing [Enter]. Try it by typing 2 and then [Enter]. You will go directly to the Main Menu Screen. If you just remember this slides number you can come directly back here by using the same process in reverse. Using Powerpoints handout printing menu, one can create 6-to-a- page thumbnails of each slide that show the slide numbers. Some instructors like to use the resulting thumbnail guide to the slide set as a direct access supplement to the hyperlinks. Second, you can offer to distribute selected slides to you students upon email request for a particular slide. (Remember, your license to use these slides does not permit you to distribute entire slide sets; you must treat the slide sets as restricted material, similar to a Teachers Manual.) Slide 23 HT-22 (1) (2)(3)(4) $ PriceQuantity$ Revenue$ Change 1.0095.0095.00----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 Instructions for Animated Slides These are the four columns of numbers in Exhibit 1, the Cournotia model that starts on p. 1 of the text. While discussing the Exhibit in class, it is useful to focus the students interest on each column sequentially. This will be done by highlighting the columns in different colors. The different colors are useful in allowing to instructor to refer back to, for instance, The yellow- highlighted Quantity information in column 2. When you get to the next slide, click on any blank part of the screen to begin the animation. Each click will highlight another column. When the animation is done, you will see the navigation button appear in the lower right-hand corner. This signals you that all of the action is done on the current slide. Use the navigation button when you are ready to begin. Slide 24 HT-23 Auto-transition in progress Slide 25 HT-24 (1) (2)(3)(4) $ PriceQuantity$ Revenue$ Change 1.0095.0095.00----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 Animation Demo #1, Prompted [Mouse-click to trigger the next step of the animation.] [Appearance of the navigation buttons indicates that the animation is complete. In this example, the buttons allow you either to go back to the last menu, or to re-do this animation.] Re-do Animation Re-do Animation Slide 26 HT-25 (1) (2)(3)(4) $ PriceQuantity$ Revenue$ Change 1.0095.0095.00----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 Animation Demo #1, Prompted [Mouse-click to trigger the next step of the animation.] [Appearance of the navigation buttons indicates that the animation is complete. In this example, the buttons allow you either to go back to the last menu, or to re-do this animation.] Re-do Animation Re-do Animation Slide 27 HT-26 Goetz & Lambert, 2013 Comment Slide Restricted-link Demo Custom Shows Start Here Slide 28 A NTITRUST L AW INTERPRETATION AND IMPLEMENTATION Copyright 2013, All Rights Reserved Statutes Session Marker Session Marker Assignments A - Law and Econ A - Law and Econ Countdown B - Overview Cases B - Overview Cases Announcements Multimedia Control Panel Intro All of the buttons on this control panel are enabled. You can simulate a real session by following the buttons, starting with Intro. All of the buttons on this control panel are enabled. You can simulate a real session by following the buttons, starting with Intro. WHEN YOU ARE DONE, CLICK HERE TO RETURN TO THE TUTORIALS MAIN MENU. WHEN YOU ARE DONE, CLICK HERE TO RETURN TO THE TUTORIALS MAIN MENU. Slide 29 1009080706050403020100 10-Second Countdown Slide 30 HT-29 Goetz & Lambert, 2013 #BeginEndComment 114 The Sale of Mineral Water in Cournotia; also scan 1 & 2 Sherman, 4 & 7 Clayton, 5 FTC, all in Appendix A. 2412Analytic Extensions and Formalizations 31224Monopolization; Aspen Skiing 42438Vertical Restraints; Graphic Products Distributors v. Itek 53857Conspiracy; Rothery Storages & Van v. Adams Van Lines 65776Mergers, Errors; Requirements for Private Recovery Current Reading Assignments You can edit this slide appropriately if you wish to display the current reading assignments. Slide 31 HT-30 Goetz & Lambert, 2013 Session Marker The Session Marker Button is temporarily assigned to this slide as a default condition. The purpose of that button is, however, to give the instructor the option of reassigning the button, after each class, to the slide where the next class should begin. Of course, the proper slide may also be accessed by the standard menu system. However, the Session Marker button does provide a convenient option for those instructors who may desire to start a class session via direct access to a particular slide. If this option holds no interest for you, it is not necessary to change this current default setting. Just ignore the button. Slide 32 HT-31 Goetz & Lambert, 2013Announcements The Announcements Button is temporarily assigned to this slide as a default condition. The purpose of that button is, however, to give the instructor the option of editing this present text block to contain an announcement for a particular class session. If you do not have a need for the Announcements feature, it is not necessary to change this current default setting. Just ignore the button and leave this template slide in its current position. Slide 33 HT-32 Goetz & Lambert, 2013 Current Chapters Table of Contents A. The Law And Economics of Antitrust 1. The Sale of Mineral Water in Cournotia 2. Some Analytic Extensions and Formalizations 3. Assumptions and Premises: Economic Modeling and Legal Reasoning B. An Overview of Antitrust In The Courts 3. Conspiracy to Restrain Trade Rothery Storage & Van Co. v. Atlas Van Lines (1986) Note: Market Power, Monopoly Power, and Filters 2. Vertical Restraints Graphic Products Distributors v. Itek Corp. (1983) Note: Lawyering Errors and Antitrust Liability Note: Copperweld Corp. v. Independence Tube Corp. 1. Monopolization Aspen Skiing Co. v. Aspen Highlands Skiing (1985) Note: Refusals to Deal As Antitrust Violations 4. Injury to Competition Through Mergers United States v. Waste Management, Inc. (1984) Note: Balancing Types of Errors in Antitrust 5. Special Requirements for Private Recovery Mid-Michigan Radiology Assocs. v. Central Mich. Comm. Hosp. (1995) Note: The Art of Pigeonholing in Antitrust (The Chapter Table of Contents is usually fully hyperlinked. In this demo only the main subsections, A & B-1, are enabled.) Slide 34 HT-33 Goetz & Lambert, 2013 A. The Law and Economics of Antitrust 1. The Why and How of the Cournotia Model 1. The Why and How of the Cournotia Model 2. Analytic Extensions and Formalizations 2. Analytic Extensions and Formalizations 3. Premises: Economic Modeling and Legal Reasoning 3. Premises: Economic Modeling and Legal Reasoning Chapter Table of Contents Slide 35 HT-34 Goetz & Lambert, 2013 1. The Sale of Mineral Water in Cournotia Exhibit 1: Tabular Model (p. 1) Exhibit 2: Effect of Chiselers on Conspiracy (p. 3) Notes and Questions (p. 4) The Why and How of this Model The Why and How of this Model USE THIS BUTTON TO RETURN WHERE YOU CAME FROM Slide 36 HT-35 Goetz & Lambert, 2013 2. Analytic Extensions and Formalizations Translation into Graphical Models Exhibit 3: Graphical Models (p. 5) Exhibit 4: Market Spoilage and Expansion (p. 7) Notes and Questions (pp. 9-10) The Dilemma of Rivalistic Behavior USE THIS RETURN BUTTON TO TAKE YOU BACK TO THE LAST MENU Slide 37 HT-36 Goetz & Lambert, 2013 3. Assumptions and Premises a. Assumptions in Social Science b. Economic Efficiency: Fundamental Premise of Antitrust? USE THIS RETURN BUTTON TO TAKE YOU BACK TO THE LAST MENU Slide 38 HT-37 Goetz & Lambert, 2013 B. An Overview of Antitrust in the Courts Chapter TC Overview Diagram 1. Monopolization 1. Monopolization 2. Vertical Restraints 2. Vertical Restraints 3. Conspiracy to Restrain Trade 3. Conspiracy to Restrain Trade 4. Injury to Competition Through Mergers 4. Injury to Competition Through Mergers 5. Special Requirements for Private Recovery 5. Special Requirements for Private Recovery The greyed-out hyperlinks are not fully enabled in this demo. Slide 39 HT-38 Goetz & Lambert, 2013 1. Monopolization Aspen Skiing : The slippery slope to monopoly??? Aspen Skiing : The slippery slope to monopoly??? Note on Refusals to Deal Note on Refusals to Deal B. Overview Chapter TC Slide 40 HT-39 Goetz & Lambert, 2013 Why Study Antitrust Law? Why Study Antitrust Law? Administrative Things Administrative Things Roadmapping Is Economics Important? Is Economics Important? Statutes Getting Ready to Start The greyed-out links are disabled in this demo. Slide 41 Principal Antitrust Statutes Treated Sec. 2 Sherman Act: Monopolization Sec. 2 Sherman Act: Monopolization Sec. 7 Clayton Act Sec. 7 Clayton Act Anticompetitive Mergers Anticompetitive Mergers Sec. 1 Sherman Act Sec. 1 Sherman Act Anticompetitive Agreements Anticompetitive Agreements Sec. 4 Clayton Act Sec. 4 Clayton Act Civil Treble Damage Suits Civil Treble Damage Suits Sec. 5 FTC Act Sec. 5 FTC Act Anticompetitive Practices Anticompetitive Practices Robinson-Patman Act Price Discrimination OVERVIEW CASESOVERVIEW CASES Sec. 3 Clayton Act Sec. 3 Clayton Act Conditioning of Sales Conditioning of Sales (See Appendix A for statutory texts) Return On this slide, you need to check for hyperlinks. Slide 42 HT-41 Goetz & Lambert, 2013 Every contract, combination..., or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony. Sec. 1, Sherman Act: Collusion Every contract, combination..., or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony. Slide 43 HT-42 Goetz & Lambert, 2013 Every contract, combination..., or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony. Sec. 1, Sherman Act: Collusion Every contract, combination..., or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony. Slide 44 HT-43 Goetz & Lambert, 2013 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony... Sec. 2, Sherman Act: Monopolization u It is illegal to be an actual monopolist u And likewise to attempt to become one u Either by unilateral conduct or by combination Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony... MonopolizationMonopolization Attempted Monopolization Conspiracy to Monopolize Slide 45 HT-44 Goetz & Lambert, 2013 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony... Sec. 2, Sherman Act: Monopolization u It is illegal to be an actual monopolist u And likewise to attempt to become one u Either by unilateral conduct or by combination Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony... MonopolizationMonopolization Attempted Monopolization Conspiracy to Monopolize Slide 46 HT-45 Goetz & Lambert, 2013 Sec. 3, Clayton Act: Illegal Conditioning It shall be unlawful... to lease or make a sale or contract for sale... on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Tying: You cant purchase Product A from me unless you also buy Product B from me. Exclusive Dealing: You cant have Product A from me unless you get it only from me. It shall be unlawful... to lease or make a sale or contract for sale... on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Slide 47 HT-46 Goetz & Lambert, 2013 Sec. 3, Clayton Act: Illegal Conditioning It shall be unlawful... to lease or make a sale or contract for sale... on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Tying: You cant purchase Product A from me unless you also buy Product B from me. Exclusive Dealing: You cant have Product A from me unless you get it only from me. It shall be unlawful... to lease or make a sale or contract for sale... on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Slide 48 HT-47 Goetz & Lambert, 2013 Sec. 4, Clayton Act: Civil Suits (a)...[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. u The civil cause of action itself. u Punitive damages equal to twice the compensatories. u Recovery of costs and attorneys fees. (a)...[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. Slide 49 HT-48 Goetz & Lambert, 2013 Sec. 4, Clayton Act: Civil Suits (a)...[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. u The civil cause of action itself. u Punitive damages equal to twice the compensatories. u Recovery of costs and attorneys fees. (a)...[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. Slide 50 HT-49 Goetz & Lambert, 2013 Sec. 7, Clayton Act: Mergers No person... shall acquire, directly or indirectly, the whole or any part of the stock or... the assets of another person..., where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. Slide 51 HT-50 Goetz & Lambert, 2013 Sec. 7, Clayton Act: Mergers No person... shall acquire, directly or indirectly, the whole or any part of the stock or... the assets of another person..., where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. Slide 52 HT-51 Goetz & Lambert, 2013 Sec. 5, Federal Trade Commission Act (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. (2) The Commission is empowered and directed to prevent persons, partnerships, or corporations... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.... (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. Slide 53 HT-52 Goetz & Lambert, 2013 Sec. 5, Federal Trade Commission Act (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. (2) The Commission is empowered and directed to prevent persons, partnerships, or corporations... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.... (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. Slide 54 HT-53 Goetz & Lambert, 2013 The Overview Cases in Chapter 1, Section B Sec. 2 Sherman Act: Monopolization Aspen Skiing Co. v. Aspen Highlands Skiing Co. Sec. 7 Clayton Act Anticompetitive Mergers United States. v. Waste Management, Inc. Sec. 1 Sherman Act Anticompetitive Agreements Sec. 4 Clayton Act Civil Treble Damage Suits Rothery Storage and Van Co. v. Atlas Van Lines Horizontal Restraints Graphics Products Distributors, Inc. v. Itek Corp. Vertical Restraints Mid-Michigan Radiology v. Central Michigan Community Hospital Slide 55 HT-54 Goetz & Lambert, 2013 The Overview Cases in Chapter 1, Section B Sec. 2 Sherman Act: Monopolization Aspen Skiing Co. v. Aspen Highlands Skiing Co. Sec. 7 Clayton Act Anticompetitive Mergers United States. v. Waste Management, Inc. Sec. 1 Sherman Act Anticompetitive Agreements Sec. 4 Clayton Act Civil Treble Damage Suits Rothery Storage and Van Co. v. Atlas Van Lines Horizontal Restraints Graphics Products Distributors, Inc. v. Itek Corp. Vertical Restraints Mid-Michigan Radiology v. Central Michigan Community Hospital Slide 56 HT-55 Goetz & Lambert, 2013 The Cournotia Hypothetical: Why and How u One of three simple economic models that permeate the course. Cournotia model of collusion; Ch. 1 (Price-fixing via cartelization) Dominant Firm model of unilateral behavior; Ch. 4 (Monopolization) Principal-Agent model of vertical relationships; Ch. 5 (Vertical Restraints) u The Cournotia model explains, right at the outset, the economic concerns that are the underlying rationale of the antitrust laws. u The model is first developed in very simple terms: a table of numbers and the assumption of zero production costs. Then, some additional wrinkles are added. Formalization and translation into graphical models. Indication of the importance of production and entry. Coming Next! [To step through this animated slide, mouse-click until you see a navigation button.] Slide 57 HT-56 Goetz & Lambert, 2013 The Cournotia Hypothetical: Why and How u One of three simple economic models that permeate the course. Cournotia model of collusion; Ch. 1 (Price-fixing via cartelization) Dominant Firm model of unilateral behavior; Ch. 4 (Monopolization) Principal-Agent model of vertical relationships; Ch. 5 (Vertical Restraints) u The Cournotia model explains, right at the outset, the economic concerns that are the underlying rationale of the antitrust laws. u The model is first developed in very simple terms: a table of numbers and the assumption of zero production costs. Then, some additional wrinkles are added. Formalization and translation into graphical models. Indication of the importance of production and entry. Coming Next! [To step through this animated slide, mouse-click until you see a navigation button.] Slide 58 HT-57 Goetz & Lambert, 2013 6. Assume that one owner remains outside the agreement. Is she better or worse off? By how much? Do you think that a successful agreement is likely? Cournotia Note Questions 1 thru 6, p. 4 1. For each one-unit change in the quantity of mineral water offered for sale, how much can the market price be expected to change? [See the "demand equation" set forth in footnote 2.] What is the common sense explanation of this price decline? 2. How have columns (3) and (4) of Exhibit 1 have been calculated? (Confirm that the numbers are correct.) 3. If a single entity owned all the springs, what would be the profit-maximizing output and price of the mineral water? 4. Absent any agreement among the landowners, how much mineral water will be offered for sale and at what price? Why does this happen? 5. Suppose that the 10 landowners wished to form a "cartel" to fix the price and output of mineral water. What can be said about the output and price terms of their agreement? How much better off (in profit terms) would they be than in the "competitive" situation? Some of the questions are hyperlinked. Clinking on them triggers a Discussion Slide. Slide 59 HT-58 Goetz & Lambert, 2013 Cournotia Note Questions 7 thru 10, p. 4 9. From a distributive standpoint, who gains and who loses if the various forms of competitive restraint are successfully implemented? 10. From an "economic efficiency" standpoint, are there any net gains or losses from the forms of restraint that you have analyzed? 7. Other than an agreement to restrain competition among themselves, what other strategies might lead to greater profits for the mineral spring owners? 8. From your present knowledge of the law, are any of the above profit- enhancing strategies actionable under the U.S. antitrust laws? If so, under what provision(s)? Slide 60 HT-59 Goetz & Lambert, 2013 (1) (2) (3) (4) $ Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 Textbooks Exhibit 1 Exhibit 1 in the textbook Slide 61 HT-60 Goetz & Lambert, 2013 (1) (2)(3)(4) $ PriceQuantity$ Revenue$ Change 1.0095.0095.00----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 THE MODELTHE MODELTHE MODELTHE MODEL Slide 62 HT-61 Goetz & Lambert, 2013 (1) (2)(3)(4) $ PriceQuantity$ Revenue$ Change 1.0095.0095.00----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 THE MODELTHE MODELTHE MODELTHE MODEL Slide 63 HT-62 Goetz & Lambert, 2013 -.04 Price Change +5.0 Quant. Change = -.008 Rate of Change -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 Answer to Note Question 1 1. For each one-unit change in the quantity of mineral water offered for sale, how much can the market price be expected to change? [See the "demand equation" set forth in footnote 2.] What is the common sense explanation of this price decline? (1) (2) $ Price Quantity 1.00 95.00 0.96 100.00 0.92 105.00 0.88 110.00 0.84 115.00 0.80 120.00 0.76 125.00 The exact equation of the demand curve in its standard form is Q = 220-125P, where Q is the total quantity of mineral demanded at price P. You may understand this better by re-casting the demand equation to show the sustainable price as a function of industry output: P = (220/125) - (1/125)Q or P = 1.76 -.008Q. This latter formulation yields the "downward sloping demand curve" familiar to many from elementary economics textbooks. Demand Curve Demand Curve Slide 64 HT-63 Goetz & Lambert, 2013 -.04 Price Change +5.0 Quant. Change = -.008 Rate of Change -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 -.04+5.00 Answer to Note Question 1 1. For each one-unit change in the quantity of mineral water offered for sale, how much can the market price be expected to change? [See the "demand equation" set forth in footnote 2.] What is the common sense explanation of this price decline? (1) (2) $ Price Quantity 1.00 95.00 0.96 100.00 0.92 105.00 0.88 110.00 0.84 115.00 0.80 120.00 0.76 125.00 The exact equation of the demand curve in its standard form is Q = 220-125P, where Q is the total quantity of mineral demanded at price P. You may understand this better by re-casting the demand equation to show the sustainable price as a function of industry output: P = (220/125) - (1/125)Q or P = 1.76 -.008Q. This latter formulation yields the "downward sloping demand curve" familiar to many from elementary economics textbooks. Demand Curve Demand Curve Slide 65 HT-64 Goetz & Lambert, 2013 Demand Curve 020406080100120140160180200 Quantity 0.00 0.50 1.00 1.50 2.00 Price Demand Curve Return Slide 66 HT-65 Goetz & Lambert, 2013 Answer to Note Question 2, p.2 1.00 * 95.00 = 95.00 0.96 * 100.00 = 96.00 0.92 * 105.00 = 96.60 0.88 * 110.00 = 96.80 0.84 * 115.00 = 96.60 0.80 * 120.00 = 96.00 0.76 * 125.00 = 95.00 (1) (2) (3) (4) $ Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 Price * Quantity = Revenue 2. How have columns (3) and (4) of Exhibit 1 been calculated? (Confirm that the numbers are correct.) Slide 67 HT-66 Goetz & Lambert, 2013 Answer to Note Question 2, p.2 1.00 * 95.00 = 95.00 0.96 * 100.00 = 96.00 0.92 * 105.00 = 96.60 0.88 * 110.00 = 96.80 0.84 * 115.00 = 96.60 0.80 * 120.00 = 96.00 0.76 * 125.00 = 95.00 (1) (2) (3) (4) $ Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 Price * Quantity = Revenue 2. How have columns (3) and (4) of Exhibit 1 been calculated? (Confirm that the numbers are correct.) Slide 68 HT-67 Goetz & Lambert, 2013 Single Ten (1) (2) (3) (4) $ Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00 Single? Ten? Q5-Cartel Answers to Note Questions 3 and 4 Slide 69 HT-68 Goetz & Lambert, 2013.16*20=3.20 (1) (2) (3) (4) $ Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00.88*11= 9.68 [?] Cartel Result??? Answer to Note Question 5 Slide 70 HT-69 Goetz & Lambert, 2013 Price Falls by 9*.008 as Output rises by 9 Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00.88*11= 9.68 ?.808*20= 16.20.808*11= 8.88 Chiselers Additional 9 Unpacking Exhibit 2 Unpacking Exhibit 2 What happens if someone chisels? Slide 71 HT-70 Goetz & Lambert, 2013 Price Falls by 9*.008 as Output rises by 9 Price Quantity $ Revenue $ Change 1.00 95.00 95.00 ----- 0.96 100.00 96.00 1.00 0.92 105.00 96.60 0.60 0.88 110.00 96.80 0.20 0.84 115.00 96.60 -0.20 0.80 120.00 96.00 -0.60 0.76 125.00 95.00 -1.00 0.72 130.00 93.60 -1.40 0.68 135.00 91.80 -1.80 0.64 140.00 89.60 -2.20 0.60 145.00 87.00 -2.60 0.56 150.00 84.00 -3.00 0.52 155.00 80.60 -3.40 0.48 160.00 76.80 -3.80 0.44 165.00 72.60 -4.20 0.40 170.00 68.00 -4.60 0.36 175.00 63.00 -5.00 0.32 180.00 57.60 -5.40 0.28 185.00 51.80 -5.80 0.24 190.00 45.60 -6.20 0.20 195.00 39.00 -6.60 0.16 200.00 32.00 -7.00.88*11= 9.68 ?.808*20= 16.20.808*11= 8.88 Chiselers Additional 9 Unpacking Exhibit 2 Unpacking Exhibit 2 What happens if someone chisels? Slide 72 HT-71 Goetz & Lambert, 2013 Discussion: Note Questions 7 and 8 7. Other than an agreement to restrain competition among themselves, what other strategies might lead to greater profits for the mineral spring owners? 8. From your present knowledge of the law, are any of the above profit-enhancing strategies actionable under the U.S. antitrust laws? If so, under what provision(s)? Sec. 2 Sherman Act: Monopolization Sec. 7 Clayton Act Anticompetitive Mergers Sec. 1 Sherman Act Anticompetitive Agreements Slide 73 HT-72 Goetz & Lambert, 2013 Discussion: Note Questions 7 and 8 7. Other than an agreement to restrain competition among themselves, what other strategies might lead to greater profits for the mineral spring owners? 8. From your present knowledge of the law, are any of the above profit-enhancing strategies actionable under the U.S. antitrust laws? If so, under what provision(s)? Sec. 2 Sherman Act: Monopolization Sec. 7 Clayton Act Anticompetitive Mergers Sec. 1 Sherman Act Anticompetitive Agreements Slide 74 HT-73 Goetz & Lambert, 2013 l l In money terms, the producers receive more money, all of which is profit to them. l l In money terms, is the consumers loss (from the higher price) exactly equal to the producers gain above? l l Less mineral water is consumed. Is this a clear social loss or waste? Discussion: Note Questions 9 and 10 9. From a distributive standpoint, who gains and who loses if the various forms of competitive restraint are successfully implemented? 10. From an "economic efficiency" standpoint, are there any net gains or losses from the forms of restraint that you have analyzed? Slide 75 HT-74 Goetz & Lambert, 2013 l l In money terms, the producers receive more money, all of which is profit to them. l l In money terms, is the consumers loss (from the higher price) exactly equal to the producers gain above? l l Less mineral water is consumed. Is this a clear social loss or waste? Discussion: Note Questions 9 and 10 9. From a distributive standpoint, who gains and who loses if the various forms of competitive restraint are successfully implemented? 10. From an "economic efficiency" standpoint, are there any net gains or losses from the forms of restraint that you have analyzed? Slide 76 HT-75 Goetz & Lambert, 2013 u u R c, the gain to the entire conspirator group R c, the gain to the entire conspirator group u u G c, the gain to an average member of the conspirator group G c, the gain to an average member of the conspirator group u u What does Exhibit 2 demonstrate about the compatibility between price-fixing and chiselers? What does Exhibit 2 demonstrate about the compatibility between price-fixing and chiselers? u u Exhibit 2 as it appears in the Casebook Exhibit 2 as it appears in the Casebook u u G n, the gain to a single non-conspirator G n, the gain to a single non-conspirator u u Exhibit 2s Explanatory Footnote Exhibit 2s Explanatory Footnote Unpacking Exhibit 2 Return Cf. NQ6 Slide 77 HT-76 Goetz & Lambert, 2013 Exhibit 2 As It Appears in the Textbook Slide 78 HT-77 Goetz & Lambert, 2013 Exhibit 2 (p.3): Effect of Chiselers on a Price-Fixing Conspiracy EXHIBIT 2EXHIBIT 2EXHIBIT 2EXHIBIT 2 ------- Number of Conspirators in the Agreement ----- Market Data 9 9 8 8 7 7 6 6 Price Quant. Rev. G n R c G c R c G c R c G c R c G c 1.00 95 95.00 20.00 75.00 8.33 55.00 6.88 35.00 5.00 15.00 2.50 0.96 100 96.00 19.20 76.80 8.53 57.60 7.20 38.40 5.49 19.20 3.20 0.92 105 96.60 18.40 78.20 8.69 59.80 7.48 41.40 5.91 23.00 3.83 0.88 110 96.80 17.60 79.20 8.80 61.60 7.70 44.00 6.29 26.40 4.40 0.84 115 96.60 16.80 79.80 8.87 63.00 7.88 46.20 6.60 29.40 4.90 0.80 120 96.00 16.00 80.00 8.89* 64.00 8.00 48.00 6.86 32.00 5.33 0.76 125 95.00 15.20 79.80 8.87 64.60 8.08 49.40 7.06 34.20 5.70 0.72 130 93.60 14.40 79.20 8.80 64.80 8.10* 50.40 7.20 36.00 6.00 0.68 135 91.80 13.60 78.20 8.69 64.60 8.08 51.00 7.29 37.40 6.23 0.64 140 89.60 12.80 76.80 8.53 64.00 8.00 51.20 7.31* 38.40 6.40 0.60 145 87.00 12.00 75.00 8.33 63.00 7.88 51.00 7.29 39.00 6.50 0.56 150 84.00 11.20 72.80 8.09 61.60 7.70 50.40 7.20 39.20 6.53* 0.52 155 80.60 10.40 70.20 7.80 59.80 7.48 49.40 7.06 39.00 6.50 0.48 160 76.80 9.60 67.20 7.47 57.60 7.20 48.00 6.86 38.40 6.40 0.44 165 72.60 8.80 63.80 7.09 55.00 6.88 46.20 6.60 37.40 6.23 0.40 170 68.00 8.00 60.00 6.67 52.00 6.50 44.00 6.29 36.00 6.00 0.36 175 63.00 7.20 55.80 6.20 48.60 6.08 41.40 5.91 34.20 5.70 0.32 180 57.60 6.40 51.20 5.69 44.80 5.60 38.40 5.49 32.00 5.33 0.28 185 51.80 5.60 46.20 5.13 40.60 5.08 35.00 5.00 29.40 4.90 0.24 190 45.60 4.80 40.80 4.53 36.00 4.50 31.20 4.46 26.40 4.40 0.20 195 39.00 4.00 35.00 3.89 31.00 3.88 27.00 3.86 23.00 3.83 0.16 200 32.00 3.20 28.80 3.20 25.60 3.20 22.40 3.20 19.20 3.20 Slide 79 HT-78 Goetz & Lambert, 2013 Exhibit 2, Footnote G n, the revenue collected by any non-conspirator is always the market price times 20, the maximum amount a non-conspirator is able to place on the market. Therefore, G n is 20 x 1.00 = 20.00 in row 1 of the table, 20 x.96 in row 2, 20 x.92 in row 3, etc. The conspiratorial group gets to collect the market price only on the residual amount that can be sold after subtracting the total already offered by the non-conspirator(s). (If the conspirators tried to sell any more than that, the assumed market price would not be achievable.) In row 1, then, R c is [95 - (1 x 20)] x 1.00 = 75.00 when there is one non-conspirator, [95 - (2 x 20)] x 1.00 = 55.00 when there are two conspirators, etc. Finally, G c, the average amount available to a single conspirator, is simply the conspirators' total revenues divided by the number of conspirators or, in row 1, 75/9, 55/8, etc. Slide 80 HT-79 Goetz & Lambert, 2013 ------- Number of Conspirators in the Agreement ----- 9 9 8 8 7 7 6 6 Price Quant. Rev. G n R c G c R c G c R c G c R c G c 1.00 95 95.00 20.00 75.00 8.33 55.00 6.88 35.00 5.00 15.00 2.50 0.96 100 96.00 19.20 76.80 8.53 57.60 7.20 38.40 5.49 19.20 3.20 0.92 105 96.60 18.40 78.20 8.69 59.80 7.48 41.40 5.91 23.00 3.83 0.88 110 96.80 17.60 79.20 8.80 61.60 7.70 44.00 6.29 26.40 4.40 0.84 115 96.60 16.80 79.80 8.87 63.00 7.88 46.20 6.60 29.40 4.90 0.80 120 96.00 16.00 80.00 8.89* 64.00 8.00 48.00 6.86 32.00 5.33 0.76 125 95.00 15.20 79.80 8.87 64.60 8.08 49.40 7.06 34.20 5.70 0.72 130 93.60 14.40 79.20 8.80 64.80 8.10* 50.40 7.20 36.00 6.00 0.68 135 91.80 13.60 78.20 8.69 64.60 8.08 51.00 7.29 37.40 6.23 0.64 140 89.60 12.80 76.80 8.53 64.00 8.00 51.20 7.31* 38.40 6.40 0.60 145 87.00 12.00 75.00 8.33 63.00 7.88 51.00 7.29 39.00 6.50 0.56 150 84.00 11.20 72.80 8.09 61.60 7.70 50.40 7.20 39.20 6.53* 0.52 155 80.60 10.40 70.20 7.80 59.80 7.48 49.40 7.06 39.00 6.50 0.48 160 76.80 9.60 67.20 7.47 57.60 7.20 48.00 6.86 38.40 6.40 0.44 165 72.60 8.80 63.80 7.09 55.00 6.88 46.20 6.60 37.40 6.23 0.40 170 68.00 8.00 60.00 6.67 52.00 6.50 44.00 6.29 36.00 6.00 0.36 175 63.00 7.20 55.80 6.20 48.60 6.08 41.40 5.91 34.20 5.70 0.32 180 57.60 6.40 51.20 5.69 44.80 5.60 38.40 5.49 32.00 5.33 0.28 185 51.80 5.60 46.20 5.13 40.60 5.08 35.00 5.00 29.40 4.90 0.24 190 45.60 4.80 40.80 4.53 36.00 4.50 31.20 4.46 26.40 4.40 0.20 195 39.00 4.00 35.00 3.89 31.00 3.88 27.00 3.86 23.00 3.83 0.16 200 32.00 3.20 28.80 3.20 25.60 3.20 22.40 3.20 19.20 3.20 ChiselerChiseler Exhibit 2 Explanation: The G n Column Slide 81 HT-80 Goetz & Lambert, 2013 ------- Number of Conspirators in the Agreement ----- 9 9 8 8 7 7 6 6 Price Quant. Rev. G n R c G c R c G c R c G c R c G c 1.00 95 95.00 20.00 75.00 8.33 55.00 6.88 35.00 5.00 15.00 2.50 0.96 100 96.00 19.20 76.80 8.53 57.60 7.20 38.40 5.49 19.20 3.20 0.92 105 96.60 18.40 78.20 8.69 59.80 7.48 41.40 5.91 23.00 3.83 0.88 110 96.80 17.60 79.20 8.80 61.60 7.70 44.00 6.29 26.40 4.40 0.84 115 96.60 16.80 79.80 8.87 63.00 7.88 46.20 6.60 29.40 4.90 0.80 120 96.00 16.00 80.00 8.89* 64.00 8.00 48.00 6.86 32.00 5.33 0.76 125 95.00 15.20 79.80 8.87 64.60 8.08 49.40 7.06 34.20 5.70 0.72 130 93.60 14.40 79.20 8.80 64.80 8.10* 50.40 7.20 36.00 6.00 0.68 135 91.80 13.60 78.20 8.69 64.60 8.08 51.00 7.29 37.40 6.23 0.64 140 89.60 12.80 76.80 8.53 64.00 8.00 51.20 7.31* 38.40 6.40 0.60 145 87.00 12.00 75.00 8.33 63.00 7.88 51.00 7.29 39.00 6.50 0.56 150 84.00 11.20 72.80 8.09 61.60 7.70 50.40 7.20 39.20 6.53* 0.52 155 80.60 10.40 70.20 7.80 59.80 7.48 49.40 7.06 39.00 6.50 0.48 160 76.80 9.60 67.20 7.47 57.60 7.20 48.00 6.86 38.40 6.40 0.44 165 72.60 8.80 63.80 7.09 55.00 6.88 46.20 6.60 37.40 6.23 0.40 170 68.00 8.00 60.00 6.67 52.00 6.50 44.00 6.29 36.00 6.00 0.36 175 63.00 7.20 55.80 6.20 48.60 6.08 41.40 5.91 34.20 5.70 0.32 180 57.60 6.40 51.20 5.69 44.80 5.60 38.40 5.49 32.00 5.33 0.28 185 51.80 5.60 46.20 5.13 40.60 5.08 35.00 5.00 29.40 4.90 0.24 190 45.60 4.80 40.80 4.53 36.00 4.50 31.20 4.46 26.40 4.40 0.20 195 39.00 4.00 35.00 3.89 31.00 3.88 27.00 3.86 23.00 3.83 0.16 200 32.00 3.20 28.80 3.20 25.60 3.20 22.40 3.20 19.20 3.20 Exhibit 2: Explanation: Calculating R c with 9 Conspirators Calculating the R c Column [Q - (20*n)] * Price = R c [95 - (20*1) ] * 1.00 = 75.00 [100- (20*1) ] *.96 = 76.80 [105- (20*1) ] *.92 = 78.20 [110 - (20*1)] *.88 = 79.20 With 8 Conspiratiors With 8 Conspiratiors Slide 82 HT-81 Goetz & Lambert, 2013 ------- Number of Conspirators in the Agreement ----- 9 9 8 8 7 7 6 6 Price Quant. Rev. G n R c G c R c G c R c G c R c G c 1.00 95 95.00 20.00 75.00 8.33 55.00 6.88 35.00 5.00 15.00 2.50 0.96 100 96.00 19.20 76.80 8.53 57.60 7.20 38.40 5.49 19.20 3.20 0.92 105 96.60 18.40 78.20 8.69 59.80 7.48 41.40 5.91 23.00 3.83 0.88 110 96.80 17.60 79.20 8.80 61.60 7.70 44.00 6.29 26.40 4.40 0.84 115 96.60 16.80 79.80 8.87 63.00 7.88 46.20 6.60 29.40 4.90 0.80 120 96.00 16.00 80.00 8.89* 64.00 8.00 48.00 6.86 32.00 5.33 0.76 125 95.00 15.20 79.80 8.87 64.60 8.08 49.40 7.06 34.20 5.70 0.72 130 93.60 14.40 79.20 8.80 64.80 8.10* 50.40 7.20 36.00 6.00 0.68 135 91.80 13.60 78.20 8.69 64.60 8.08 51.00 7.29 37.40 6.23 0.64 140 89.60 12.80 76.80 8.53 64.00 8.00 51.20 7.31* 38.40 6.40 0.60 145 87.00 12.00 75.00 8.33 63.00 7.88 51.00 7.29 39.00 6.50 0.56 150 84.00 11.20 72.80 8.09 61.60 7.70 50.40 7.20 39.20 6.53* 0.52 155 80.60 10.40 70.20 7.80 59.80 7.48 49.40 7.06 39.00 6.50 0.48 160 76.80 9.60 67.20 7.47 57.60 7.20 48.00 6.86 38.40 6.40 0.44 165 72.60 8.80 63.80 7.09 55.00 6.88 46.20 6.60 37.40 6.23 0.40 170 68.00 8.00 60.00 6.67 52.00 6.50 44.00 6.29 36.00 6.00 0.36 175 63.00 7.20 55.80 6.20 48.60 6.08 41.40 5.91 34.20 5.70 0.32 180 57.60 6.40 51.20 5.69 44.80 5.60 38.40 5.49 32.00 5.33 0.28 185 51.80 5.60 46.20 5.13 40.60 5.08 35.00 5.00 29.40 4.90 0.24 190 45.60 4.80 40.80 4.53 36.00 4.50 31.20 4.46 26.40 4.40 0.20 195 39.00 4.00 35.00 3.89 31.00 3.88 27.00 3.86 23.00 3.83 0.16 200 32.00 3.20 28.80 3.20 25.60 3.20 22.40 3.20 19.20 3.20 Calculating the R c Column [Q - (20*n)] * Price = R [95 - (20*2) ] * 1.00 = 55.00 [100- (20*2) ] *.96 = 57.60 [105- (20*2) ] *.92 = 59.80 [110 - (20*2)] *.88 = 61.60 Exhibit 2 Explanation: Calculating R c with 8 Conspirators Slide 83 HT-82 Goetz & Lambert, 2013 Average Gain to Member of Conspiracy? Just divide the groups total gain by the number of conspirators! Slide 84 HT-83 Goetz & Lambert, 2013 ------- Number of Conspirators in the Agreement ----- 9 9 8 8 7 7 6 6 Price Quant. Rev. G n R c G c R c G c R c G c R c G c 1.00 95 95.00 20.00 75.00 8.33 55.00 6.88 35.00 5.00 15.00 2.50 0.96 100 96.00 19.20 76.80 8.53 57.60 7.20 38.40 5.49 19.20 3.20 0.92 105 96.60 18.40 78.20 8.69 59.80 7.48 41.40 5.91 23.00 3.83 0.88 110 96.80 17.60 79.20 8.80 61.60 7.70 44.00 6.29 26.40 4.40 0.84 115 96.60 16.80 79.80 8.87 63.00 7.88 46.20 6.60 29.40 4.90 0.80 120 96.00 16.00 80.00 8.89* 64.00 8.00 48.00 6.86 32.00 5.33 0.76 125 95.00 15.20 79.80 8.87 64.60 8.08 49.40 7.06 34.20 5.70 0.72 130 93.60 14.40 79.20 8.80 64.80 8.10* 50.40 7.20 36.00 6.00 0.68 135 91.80 13.60 78.20 8.69 64.60 8.08 51.00 7.29 37.40 6.23 0.64 140 89.60 12.80 76.80 8.53 64.00 8.00 51.20 7.31* 38.40 6.40 0.60 145 87.00 12.00 75.00 8.33 63.00 7.88 51.00 7.29 39.00 6.50 0.56 150 84.00 11.20 72.80 8.09 61.60 7.70 50.40 7.20 39.20 6.53* 0.52 155 80.60 10.40 70.20 7.80 59.80 7.48 49.40 7.06 39.00 6.50 0.48 160 76.80 9.60 67.20 7.47 57.60 7.20 48.00 6.86 38.40 6.40 0.44 165 72.60 8.80 63.80 7.09 55.00 6.88 46.20 6.60 37.40 6.23 0.40 170 68.00 8.00 60.00 6.67 52.00 6.50 44.00 6.29 36.00 6.00 0.36 175 63.00 7.20 55.80 6.20 48.60 6.08 41.40 5.91 34.20 5.70 0.32 180 57.60 6.40 51.20 5.69 44.80 5.60 38.40 5.49 32.00 5.33 0.28 185 51.80 5.60 46.20 5.13 40.60 5.08 35.00 5.00 29.40 4.90 0.24 190 45.60 4.80 40.80 4.53 36.00 4.50 31.20 4.46 26.40 4.40 0.20 195 39.00 4.00 35.00 3.89 31.00 3.88 27.00 3.86 23.00 3.83 0.16 200 32.00 3.20 28.80 3.20 25.60 3.20 22.40 3.20 19.20 3.20 55.00 88 88 = 6.88 57.60 88 88 = 7.20 59.80 88 88 = 7.48 61.60 8 = 7.70 Exhibit 2 Explanation: Calculating G c with 8 Conspirators Calculating the G c Column Slide 85 HT-84 Goetz & Lambert, 2013 Market Power with Competitive Fringe Firm(s) Slide 86 HT-85 Goetz & Lambert, 2013 Market Power with Competitive Fringe Firm(s) Slide 87 HT-86 Goetz & Lambert, 2013 020406080100120140160180200 Quantity -1.50 -0.50 0.00 0.50 1.00 1.50 2.00 Price Demand Curve Marginal Revenue.88 020406080100120140160180200 0 10 20 30 40 50 60 70 80 90 100 Total Revenue Quantity Exhibit 3, p. 6, as it appears in the textbook. Zoom Slide 88 HT-87 Goetz & Lambert, 2013 Exhibit 3, Lower Panel Only Total Revenue 020406080100120140160180200 0 10 20 30 40 50 60 70 80 90 100 Total Revenue Original Exhibit 3 Exhibit 3 Slide 89 HT-88 Goetz & Lambert, 2013 Exhibit 3, Upper Panel Only 020406080100120140160180200 Quantity -1.50 -0.50 0.00 0.50 1.00 1.50 2.00 Price Demand Curve Marginal Revenue.88 Original Exhibit 3 Exhibit 3 Slide 90 HT-89 Goetz & Lambert, 2013 Exhibit 3, Upper Panel Only 020406080100120140160180200 Quantity -1.50 -0.50 0.00 0.50 1.00 1.50 2.00 Price Demand Curve Marginal Revenue.88 Original Exhibit 3 Exhibit 3 Slide 91 Why do firms spoil the market? Slide 92 HT-91 Goetz & Lambert, 2013 Textbook Version of Exhibit 4, p. 7: Market Spoilage and Expansion Slide 93 HT-92 Goetz & Lambert, 2013 Exhibit 4a: Explanation of Market Spoilage and Expansion 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price.88 Demand Curve Supply Expands By 10 Price Is Depressed by Quantity Increase Slide 94 HT-93 Goetz & Lambert, 2013 Exhibit 4b: (Expansion) Revenue from New Sales at Lower Price 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price Expansion.80.88 Demand Curve Slide 95 HT-94 Goetz & Lambert, 2013 Exhibit 4c: Market Spoilage and Expansion Summarized Expansion Effect minus Market Spoilage Net Revenue Change Slide 96 HT-95 Goetz & Lambert, 2013 Exhibit 4c: Market Spoilage and Expansion Summarized Expansion Effect minus Market Spoilage Net Revenue Change Slide 97 HT-96 Goetz & Lambert, 2013 Influence of Demand Curves Shape on Market Spoilage and Expansion 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price Market Spoilage.80.88 Demand Curve Expansion Demand Curve Slide 98 HT-97 Goetz & Lambert, 2013 Influence of Demand Curves Shape on Market Spoilage 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price.88 Demand Curve Market Spoilage Expansion Slide 99 HT-98 Goetz & Lambert, 2013 Comparison Slide 100 HT-99 Influence of Demand Curves Shape on Market Spoilage and Expansion 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price Market Spoilage.80.88 Demand Curve Expansion Demand Curve Slide 101 HT-100 Goetz & Lambert, 2013 Influence of Demand Curves Shape on Market Spoilage 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price.88 Demand Curve Market Spoilage Expansion Repeat Slide 102 HT-101 Goetz & Lambert, 2013 Influence of Demand Curves Shape on Market Spoilage 0102030405060708090100110120 Quantity 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Price.88 Demand Curve Market Spoilage Expansion Repeat Slide 103 HT-102 Goetz & Lambert, 2013 Discussion: Note Questions 7 and 8 7. Other than an agreement to restrain competition among themselves, what other strategies might lead to greater profits for the mineral spring owners? 8. From your present knowledge of the law, are any of the above profit-enhancing strategies actionable under the U.S. antitrust laws? If so, under what provision(s)? Sec. 2 Sherman Act: Monopolization Sec. 7 Clayton Act Anticompetitive Mergers Sec. 1 Sherman Act Anticompetitive Agreements Slide 104 HT-103 Goetz & Lambert, 2013 Discussion: Note Questions 7 and 8 7. Other than an agreement to restrain competition among themselves, what other strategies might lead to greater profits for the mineral spring owners? 8. From your present knowledge of the law, are any of the above profit-enhancing strategies actionable under the U.S. antitrust laws? If so, under what provision(s)? Sec. 2 Sherman Act: Monopolization Sec. 7 Clayton Act Anticompetitive Mergers Sec. 1 Sherman Act Anticompetitive Agreements Slide 105 HT-104 Goetz & Lambert, 2013 l l In money terms, the producers receive more money, all of which is profit to them. l l In money terms, is the consumers loss (from the higher price) exactly equal to the producers gain above? l l Less mineral water is consumed. Is this a clear social loss or waste? Discussion: Note Questions 9 and 10 9. From a distributive standpoint, who gains and who loses if the various forms of competitive restraint are successfully implemented? 10. From an "economic efficiency" standpoint, are there any net gains or losses from the forms of restraint that you have analyzed? Slide 106 HT-105 Goetz & Lambert, 2013 l l In money terms, the producers receive more money, all of which is profit to them. l l In money terms, is the consumers loss (from the higher price) exactly equal to the producers gain above? l l Less mineral water is consumed. Is this a clear social loss or waste? Discussion: Note Questions 9 and 10 9. From a distributive standpoint, who gains and who loses if the various forms of competitive restraint are successfully implemented? 10. From an "economic efficiency" standpoint, are there any net gains or losses from the forms of restraint that you have analyzed? Slide 107 HT-106 Goetz & Lambert, 2013 Notes and Questions, Pp. 9-11 5, 6 Feasibility of Entry 5, 6 Feasibility of Entry 1, 2, 3, 4 Influence of Costs 1, 2, 3, 4 Influence of Costs 7 Geographic Competition 7 Geographic Competition 8, 9 Substitute Products, Cost Advantages 8, 9 Substitute Products, Cost Advantages 10, 11 Barriers, Natural and Created 10, 11 Barriers, Natural and Created Slide 108 HT-107 Goetz & Lambert, 2013 Assumptions and Premises Notes and Questions 1 thru 4, pp. 9-10 4. For the competitors operating in accord with the data of question (3) immediately above, what would be the optimal collusive arrangement in terms of quantity sold per spring? How does this compare with the conclusions of the original Exhibit 1 model? Why? 2. Suppose each spring has to be drilled open initially and then clogs up again after exactly 1000 days. Call this initial "start-up" cost $X. How high could the number X be for the 10 spring owners to operate profitably in this business without colluding? 3. If the cost of opening a single spring were $480, what would happen in the absence of collusion? How many springs would operate and at what price would they be selling? 1. The purpose of this exercise is to vary the simplifying assumptions of Exhibit 1 and see what happens as a consequence. Hence, you should retain all of the original assumptions except those that you are explicitly asked to change in the separate questions below. Slide 109 HT-108 Goetz & Lambert, 2013 Assumptions and Premises Notes and Questions 5 & 6, p. 10 5. Assume a deus ex machina that will enforce the optimal agreement hypothesized in (4) above by punishing any chiseling with lethal lightning bolts. What other threat now exists to the viability of the agreement? How much does it matter if there are (a) only 10 possible sites for springs to be drilled open or (b) a larger number (e.g., 30) of potential sites that could be opened? 6. How would the answers to each of the above questions be changed if it cost a total of 20 cents, including a fair rate of return on any funds invested, to collect and market each barrel of water? Slide 110 HT-109 Goetz & Lambert, 2013 Note Question 7, p. 10: Geographic Competition 7. Go back to all of the simple cost assumptions of the original Exhibit 1. Assume, however, that: Bertrandia is 10 miles from Cournotia and that the transport cost of a unit of mineral water is a quarter of a cent per mile. Bertrandia is a mirror image of Cournotia in every respect, including having 10 mineral springs exactly like those in Cournotia. The cartel-enforcing deus ex machina is once again operating, but only in Cournotia. What is the highest price that the Cournotian producers can charge before the Bertrandians can compete with them? Call this price the "entry-preventing price." Would it make sense for the Cournotians to try to exceed this price level? Why? The relevance of spatial competition from "foreign sources," plays a key role in the classic Alcoa case in Ch. 4, as well as in many other antitrust cases. As you read the cases, note that the law generally requires an antitrust complaint to identify both the relevant product market and the relevant geographic market. The concept of the entry-preventing price is important in the evaluation of mergers in Ch. 7. Slide 111 HT-110 Goetz & Lambert, 2013 9. Suppose that we were to reintroduce the cost conditions of question (6) above --both the drilling and the per unit costs-- but apply these costs only to Bertrandia. The effect of this would be that Cournotia has a considerable cost advantage over Bertrandia in the production of mineral water. How does this cost differential affect the prognosis for successful anticompetitive price-increases in Cournotia? 8. The last question alerted you to the issues that may arise with respect to geographic market. As we shall see, similar questions will arise in the proper legal, and economic, delineation of product markets. Even for the Cournotia scenario, the definition of "product" is perhaps less simple than it first seems. What forms of "entry," or other competition with the mineral- water producers, might arise from the sales of things other than mineral water itself? [Hint: Might some people regard wine as a substitute for mineral water? If the mineral springs in question produce "naturally carbonated" mineral water, could uncarbonated water be converted into carbonated? Which possibilities involve demand substitutability? Supply substitutability?] Assumptions and Premises Questions 8 and 9, pp. 10-11 Slide 112 HT-111 Goetz & Lambert, 2013 Assumptions and Premises Questions 10 and 11, p.11 10. If you were a Cournotian producer, what means could you employ to erect "barriers" to the entry of the Bertrandians into your market? Which, if any, of those barrier-erecting efforts offend the antitrust laws as you presently understand them? 11. What generalizations, even if only of a tentative nature, can you draw about the influence of costs and entry? Slide 113 HT-112 Goetz & Lambert, 2013 Discussion: Question 2 Recall, from Question 4 on p. 4 in the last section, that under competition, each landowner would earn $3.20/day from the 20 barrels sold at the competitive price of.16. Over 1000 days, he would therefore earn: $3.20*1000=$3,200. As long as the start-up costs are less than $3,200, it would be worthwhile for the landowner to operate a mineral water business. Slide 114 HT-113 Goetz & Lambert, 2013 Discussion: Question 2 Recall, from Question 4 on p. 4 in the last section, that under competition, each landowner would earn $3.20/day from the 20 barrels sold at the competitive price of.16. Over 1000 days, he would therefore earn: $3.20*1000=$3,200. As long as the start-up costs are less than $3,200, it would be worthwhile for the landowner to operate a mineral water business. Slide 115 HT-114 Goetz & Lambert, 2013 Discussion: Question 3 l l If cost of operating spring for the single owner is $480 per 1000 days --i.e., less than $3200-- the spring owner will operate. Once she chooses to operate, there is no additional cost for producing more rather than fewer barrels. Thus, she will choose to produce the maximum possible 20 barrels. l l The other landowners will make similar calculations. Thus, as before, 200 barrels/day will be sold at a price of $.16. BUT now profit" is reduced by cost of $480/1000=$.48/day for each landowner. Thus, each landowner earns $.16*20-$.48=$2.72/day. l fixed costs do not tell you how much to produce; only whether to produce at all. l The general conclusion is that fixed costs do not tell you how much to produce; only whether to produce at all. Once you have committed to producing, fixed costs are irrelevant --until renewal once again becomes necessary. Bygones are bygones. Slide 116 HT-115 Goetz & Lambert, 2013 Discussion: Question 4 If all 10 springs operate, costs are ($480*10)/1000 = $4.80/day. Profits are ($.88*110) - $4.80 = $96.80 - $4.80 = $92. Thats $9.20/member, less than the $9.68/member in the zero-cost example. BUT because each spring can produce 20 barrels/day, and the profit maximizing output for the cartel is 110 barrels/day, cartel needs only 6 producing springs; 4 cartel members could close down. Costs then decline to ($480*6)/1000 = $2.88/day. Profits are $96.80 - $2.88 = $93.92, thus beating the $92 profit flow when all produce. Of course, the remaining daily costs ($2.88) would have to be shared equally among all the cartel members, even the ones who don't open their springs. (Would be approx. $.29/member.) Is this consistent with the notion that fixed costs do not determine production decisions? YES: for the cartel, these are not really "fixed" costs. The costs vary depending on how many springs operate. What is the potential relevance of this to mergers or downsizing? Slide 117 HT-116 Goetz & Lambert, 2013 Discussion: Question 4 If all 10 springs operate, costs are ($480*10)/1000 = $4.80/day. Profits are ($.88*110) - $4.80 = $96.80 - $4.80 = $92. Thats $9.20/member, less than the $9.68/member in the zero-cost example. BUT because each spring can produce 20 barrels/day, and the profit maximizing output for the cartel is 110 barrels/day, cartel needs only 6 producing springs; 4 cartel members could close down. Costs then decline to ($480*6)/1000 = $2.88/day. Profits are $96.80 - $2.88 = $93.92, thus beating the $92 profit flow when all produce. Of course, the remaining daily costs ($2.88) would have to be shared equally among all the cartel members, even the ones who don't open their springs. (Would be approx. $.29/member.) Is this consistent with the notion that fixed costs do not determine production decisions? YES: for the cartel, these are not really "fixed" costs. The costs vary depending on how many springs operate. What is the potential relevance of this to mergers or downsizing? Slide 118 HT-117 Goetz & Lambert, 2013 Discussion: Cournotia Extensions Question 5 5. Assume a deus ex machina that will enforce the optimal agreement hypothesized in (4) above by punishing any chiseling with lethal lightning bolts. What other threat now exists to the viability of the agreement? How much does it matter if there are (a) only 10 possible sites for springs to be drilled open or (b) a larger number (e.g., 30) of potential sites that could be opened? This question raises the issue of entry by producers who are not now in the market, but could be especially at a (higher) cartel price. Slide 119 HT-118 Goetz & Lambert, 2013 Discussion: Cournotia Extensions Question 5 5. Assume a deus ex machina that will enforce the optimal agreement hypothesized in (4) above by punishing any chiseling with lethal lightning bolts. What other threat now exists to the viability of the agreement? How much does it matter if there are (a) only 10 possible sites for springs to be drilled open or (b) a larger number (e.g., 30) of potential sites that could be opened? This question raises the issue of entry by producers who are not now in the market, but could be especially at a (higher) cartel price. Slide 120 HT-119 Goetz & Lambert, 2013 Discussion: Cournotia Extensions Question 6 6. How would the answers to each of the above questions be changed if it cost a total of 20 cents, including a fair rate of return on any funds invested, to collect and market each barrel of water? This question introduces the very important concept of marginal costs, i.e., the 20 cents additional that each unit costs. There are two differences in the results now: The entry price must now cover both the fixed costs of opening a well plus the marginal costs per unit; The entry price must now cover both the fixed costs of opening a well plus the marginal costs per unit; Even if the fixed costs of the well are sunk, a firm would not want to operate if its marginal revenues per sale were less than the 20 cents marginal cost. Even if the fixed costs of the well are sunk, a firm would not want to operate if its marginal revenues per sale were less than the 20 cents marginal cost. Slide 121 HT-120 Goetz & Lambert, 2013 Discussion: Cournotia Extensions Question 6 6. How would the answers to each of the above questions be changed if it cost a total of 20 cents, including a fair rate of return on any funds invested, to collect and market each barrel of water? This question introduces the very important concept of marginal costs, i.e., the 20 cents additional that each unit costs. There are two differences in the results now: The entry price must now cover both the fixed costs of opening a well plus the marginal costs per unit; The entry price must now cover both the fixed costs of opening a well plus the marginal costs per unit; Even if the fixed costs of the well are sunk, a firm would not want to operate if its marginal revenues per sale were less than the 20 cents marginal cost. Even if the fixed costs of the well are sunk, a firm would not want to operate if its marginal revenues per sale were less than the 20 cents marginal cost. Slide 122 HT-121 Goetz & Lambert, 2013 At prices above 18.50 Bertrandia producers can sell into the Cournotia Market Discussion, NQ, p. 10: Bertrandian Geographic Competition Distance Cents 012345678910 0 2 4 6 8 12 14 16 18 20 10*.25 =2.5 entry- preventin g prices Slide 123 HT-122 Goetz & Lambert, 2013 At prices above 18.50 Bertrandia producers can sell into the Cournotia Market Discussion, NQ, p. 10: Bertrandian Geographic Competition Distance Cents 012345678910 0 2 4 6 8 12 14 16 18 20 10*.25 =2.5 entry- preventin g prices Slide 124 HT-123 Goetz & Lambert, 2013 Discussion: Question 8 Slide 125 HT-124 Goetz & Lambert, 2013 Discussion: Question 9 Suppose that cost disadvantage were 2 cents per unit. What difference, if any, is there between that cost disadvantage and the transport cost barrier that we analyzed in Question 7 ? 1a-76 Discussion,Ques7: Geographic Competition fromBertrandia Distance Cents 012345678910 0 2 4 6 8 12 14 16 18 20 10*.25 =2.5 At prices above 18.50Bertrandiaproducers can sell into theCournotiaMarket Slide 126 HT-125 Goetz & Lambert, 2013 Discussion: Question 10 Slide 127 HT-126 Goetz & Lambert, 2013 Discussion: Question 11 Slide 128 HT-127 Goetz & Lambert, 2013 The Overview Cases in Chapter 1, Section B Sec. 2 Sherman Act: Monopolization Aspen Skiing Co. v. Aspen Highlands Skiing Co. Sec. 7 Clayton Act Anticompetitive Mergers United States. v. Waste Management, Inc. Sec. 1 Sherman Act Anticompetitive Agreements Sec. 4 Clayton Act Civil Treble Damage Suits Rothery Storage and Van Co. v. Atlas Van Lines Horizontal Restraints Graphics Products Distributors, Inc. v. Itek Corp. Vertical Restraints Mid-Michigan Radiology v. Central Michigan Community Hospital Return Slide 129 HT-128 Goetz & Lambert, 2013 u u Jury Instructions Jury Instructions Aspen v. Aspen Highlands u u Market Power Market Power u u Elements of Monopolization Offense Elements of Monopolization Offense u u Right to Refuse to Cooperate with Competitor? Right to Refuse to Cooperate with Competitor? u u Characterizations: Competitively Malign vs. Benign Practices Characterizations: Competitively Malign vs. Benign Practices u u Exhibit 5: Marketing Memorandum for Big Ski Exhibit 5: Marketing Memorandum for Big Ski u u Notes and Questions Notes and Questions 1. Monopolizing 1. Monopolizing u u Attempted Monopolization Attempted Monopolization u u Epilogue Epilogue Chapter TC Chapter TC Slide 130 HT-129 Goetz & Lambert, 2013 Attempted Monopolization In Lorain Journal, the violation of 2 was an attempt to monopolize, rather than monopolization, but the question of intent is relevant to both offenses. In the former case it is necessary to prove a specific intent to accomplish the forbidden objectiveas Judge Hand explained, an intent which goes beyond the mere intent to do the act. United States v. Aluminum Co. of America, 148 F.2d 416, 432 (CA2 1945). In the latter case evidence of intent is merely relevant to the question whether the challenged conduct is fairly characterized as exclusionary or anticompetitiveto use the words in the trial courts instructionsor predatory, to use a word that scholars seem to favor. [p. 18] Slide 131 HT-130 Goetz & Lambert, 2013 Elements of the Offense [p.15] (1) The possession of monopoly power in a relevant market. (2) The wilful acquisition, maintenance, or use of that power by anticompetitive means or for anticompetitive or exclusionary purposes. Bad Conduct Slide 132 HT-131 Goetz & Lambert, 2013 Elements of the Offense [p.15] (1) The possession of monopoly power in a relevant market. (2) The wilful acquisition, maintenance, or use of that power by anticompetitive means or for anticompetitive or exclusionary purposes. Bad Conduct Slide 133 HT-132 Goetz & Lambert, 2013 Did Ski Really Have Monopoly Power? u u In what product market? In what product market? u u In what geographic market? In what geographic market? Note that these bullets are hyperlinks. Slide 134 These products also in the relevant market? cross-country skiing ice-skating deer hunting swimming at tropical beaches touring Europe Club Med cruises Chapter TC Chapter TC Note that the animated list here appears automatically, without any interaction by you Slide 135 These products also in the relevant market? cross-country skiing ice-skating deer hunting swimming at tropical beaches touring Europe Club Med cruises Chapter TC Chapter TC Note that the animated list here appears automatically, without any interaction by you Slide 136 HT-135 Goetz & Lambert, 2013 9. Suppose that we were to reintroduce the cost conditions of question (6) above --both the drilling and the per unit costs-- but apply these costs only to Bertrandia. The effect of this would be that Cournotia has a considerable cost advantage over Bertrandia in the production of mineral water. How does this cost differential affect the prognosis for successful anticompetitive price-increases in Cournotia? 8. The last question alerted you to the issues that may arise with respect to geographic market. As we shall see, similar questions will arise in the proper legal, and economic, delineation of product markets. Even for the Cournotia scenario, the definition of "product" is perhaps less simple than it first seems. What forms of "entry," or other competition with the mineral- water producers, might arise from the sales of things other than mineral water itself? [Hint: Might some people regard wine as a substitute for mineral water? If the mineral springs in question produce "naturally carbonated" mineral water, could uncarbonated water be converted into carbonated? Which possibilities involve demand substitutability? Supply substitutability?] Assumptions and Premises Questions 8 and 9 Remember This? Slide 137 HT-136 Goetz & Lambert, 2013 Are these places also in the relevant market? l l other Western slopes other Western slopes l l other U.S. slopes other U.S. slopes l l foreign ski slopes foreign ski slopes Slide 138 HT-137 Goetz & Lambert, 2013 Are these places also in the relevant market? l l other Western slopes other Western slopes l l other U.S. slopes other U.S. slopes l l foreign ski slopes foreign ski slopes Slide 139 HT-138 Goetz & Lambert, 2013 Other Western Slopes? Slide 140 HT-139 Goetz & Lambert, 2013 Other Western Slopes? Slide 141 HT-140 Goetz & Lambert, 2013 Other U.S. Slopes? Slide 142 HT-141 Goetz & Lambert, 2013 Foreign Slopes? Slide 143 HT-142 Goetz & Lambert, 2013 No Unqualified Right to Refuse to Deal With a Competitor The publisher claims a right as a private business concern to select its customers and to refuse to accept advertisements from whomever it pleases. We do not dispute that general right. But the word right is one of the most deceptive of pitfalls; it is so easy to slip from a qualified meaning in the premise to an unqualified one in the conclusion. Most rights are qualified. American Bank & Trust Co. v. Federal Bank, 256 U.S. 350, 358. The right claimed by the publisher is neither absolute nor exempt from regulation. Its exercise as a purposeful means of monopolizing interstate commerce is prohibited by the Sherman Act. [last of p. 17, quoting Lorain Journal ] Note the optional supplemental link on this button. Instructions Approved Instructions Approved Slide 144 HT-143 Goetz & Lambert, 2013 These Jury Instructions Approved... a company which possesses monopoly power and which refuses to enter into a joint operating agreement with a competitor or otherwise refuses to deal with a competitor in some manner does not violate 2 if valid business reasons exist for that refusal. In other words, if there were legitimate business reasons for the refusal, then the defendant, even if he is found to possess monopoly power in a relevant market, has not violated the law. We are concerned with conduct which unnecessarily excludes or handicaps competitors. This is conduct which does not benefit consumers by making a better product or service available or in other ways and instead has the effect of impairing competition. [bottom of p. 15] Slide 145 HT-144 Goetz & Lambert, 2013 The Characterization Problem In Antitrust Litigation Malign Scenario = anticompetitive purpose, predatory Malign Scenario Malign Scenario Benign Scenario = procompetitive, honestly industrial Relevant Qs Relevant Qs [Click until you see the navigation buttons appear.] Note the optional supplemental link on this button. Slide 146 HT-145 Goetz & Lambert, 2013 The Malign Scenario [p.19, bottom] Perhaps most significant, however, is the evidence relating to Ski Co. itself, for Ski Co. did not persuade the jury that its conduct was justified by any normal business purpose. Ski Co. was apparently willing to forgo daily ticket sales both to skiers who sought to exchange the coupons contained in Highlands' Adventure Pack, and to those who would have purchased Ski Co. daily lift tickets from Highlands if Highlands had been permitted to purchase them in bulk. The jury may well have concluded that Ski Co. elected to forgo these short run benefits because it was more interested in reducing competition in the Aspen market over the long run by harming its smaller competitor. Slide 147 HT-146 Goetz & Lambert, 2013 No Plausible Benign Scenario? That conclusion is strongly supported by Ski Co.'s failure to offer any [credible] efficiency justification whatever for its pattern of conduct. In defending the decision to terminate the jointly offered ticket, Ski Co. claimed that usage could not be properly monitored. The evidence, however, established that Ski Co. itself monitored the use of the 3-area passes based on a count taken by lift operators, and distributed the revenues among its mountains on that basis. Exh. 5 Memo Exh. 5 Memo [page 20, first full paragraph] Slide 148 HT-147 Goetz & Lambert, 2013 Case Exhibit 5: Marketing Analysis for Defendant Big Ski Non-Cooperative Profits Cooperative Revenue Sources Big Little Big Little Slopes n (n-1) 1 GC 1 (n-1) 1 20 NA NA NA NA NA 2 50 21 21 8 25.00 25.00 3 75 51 22 2 50.00 25.00 4 105 77 22 6 78.75 26.25 Note: "GC" indicates aggregate gains from cooperative marketing of area- wide tickets. Little's Bargaining Position Revenue-Source Allocation: 26.25/105 = 25% Find "Break-even" Allocation for Little Ski: S x 105 = 22 S = 22/105 S = 20.9% (makes Little as well off as non-cooperative arrangement) Q10 Use Buttons to Zoom Slide 149 HT-148 Goetz & Lambert, 2013 (Enlargement 1, Exhibit 5 on p. 23) Non-Cooperative Profits Cooperative Revenue Sources Big Little Big Little Slopes n (n-1) 1 GC 1 (n-1) 1 20 NA NA NA NA NA 2 50 21 21 8 25.00 25.00 3 75 51 22 2 50.00 25.00 4 105 77 22 6 78.75 26.25 Note: "GC" indicates aggregate gains from cooperative marketing of area-wide tickets. Q10 Go Back Go Back Case Note the optional supplemental link on this button. Slide 150 HT-149 Goetz & Lambert, 2013 (Enlargement 2, Exhibit 5) Little's Bargaining Position Revenue-Source Allocation: 26.25/105 = 25% Find "Break-even" Allocation for Little Ski: S x 105 = 22 S = 22/105 S = 20.9% (makes Little as well off as non-cooperative arrangement) Q10 Go Back Go Back Case Slide 151 HT-150 Goetz & Lambert, 2013 Aspen Skiing Notes and Questions Case u u Questions 1-3:Market Power Issues Questions 1-3:Market Power Issues u u Questions 4-6:Characterization Issues Questions 4-6:Characterization Issues u u Questions 8-9:Important Antitrust Terminology Questions 8-9:Important Antitrust Terminology u u Questions 7, 10: Cooperation Issues Questions 7, 10: Cooperation Issues u u Questions 11-13:Cooperation Contd.; Stevens note Questions 11-13:Cooperation Contd.; Stevens note Slide 152 HT-151 Goetz & Lambert, 2013 Aspen Skiing Market Power Q1 thru Q3 1. What is the market over which Aspen was believed by the jury to have, or to be seeking, monopoly power? In the Mineral Springs hypothetical above, what would be the analogue of this alleged conduct? 2. What do you suppose the defense argued at the trial court level about the plausibility of Ski Co. being able to obtain monopoly power? Was the nature of the monopolized market an issue before the Supreme Court? 3. What economic power does the defendant in this case have over its rival? What is the origin of this power? One benign explanation is that the defendant simply exercised superior business acumen and foresight in buying up and developing ski resources within a burgeoning geographic market. (Evaluate the relative plausibility of alternative explanations.) To what extent should the defendant be entitled to exploit an advantage gained by superior market skill? Remember: NQs that have an answering Discussion slide have an underlying hyperlink that will be signaled by the cursor turning to a hand when it passes over the question. Find and try a few of these. Slide 153 HT-152 Goetz & Lambert, 2013 Aspen Skiing Characterization: Q4 thru Q6 4. Assess the credibility of the defenses actual attempts at benign explanations of why ordinary business reasons caused it not to continue with the all-area ticket arrangement. 6. The behavior at issue in antitrust suits is commonly susceptible to alternative characterizations by the parties. In this casebook, we refer to opposing procompetitive and anticompetitive explanations of the conduct as the benign and malign scenarios, respectively. It is useful to begin developing a skill in recognizing the benign and malign versions of the facts. In many instances, one version or the other is very much more difficult for a juryor even a judgeto understand and appreciate. 5. What about the malign explanation? Does the case provide any reason to believe that the defendants failure to cooperate with the plaintiff would have caused the plaintiff to be driven out of business? If not, how could the defendant have benefited from the conduct charged? [Question 7 is below on slide with Q10.] Remember: NQs that have an answering Discussion slide have an underlying hyperlink that will be signaled by the cursor turning to a hand when it passes over the question. Find and try a few of these. Slide 154 HT-153 Goetz &