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Antitrust and the Issue of Competitive Advantage: Economic Analysis and United States v. IBM

Published online by Cambridge University Press:  20 November 2018

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Review Essays
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Copyright © American Bar Foundation, 1985 

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References

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19 Prominent among these studies were the following: (on predatory pricing) J. S. McGee, Predatory Price Cutting: The Standard Oil (N.J.) Case, 1 J. L. & Econ. 137 (1958); K. G. Elzinga, Predatory Pricing: The Case of the Gunpowder Trust, 13 J. L. & Econ. 223 (1970); (on price conspiracies) Paul MacAvoy, The Economic Effects of Regulation (1965); Fritz Voigt, German Experience with Cartels and Their Control During Pre-War and Post-War Periods, in J. P. Miller, ed., Competition, Cartels and Their Regulation 171 (1962); George Hay & Daniel Kelley, An Empirical Survey of Price Fixing Conspiracies, 17 J. L. & Econ. 13 (1974); (on trade restraint) Ward Bowman, Tying Arrangements and the Leverage Problem, 67 Yale L. J. 19 (1957); Lester Telser, Why Should Manufacturers Want Fair Trade? 3 J. L. & Econ. 86 (1960); John McGee, Some Economic Issues in Robinson-Patman Land, 30 L. & Contemp. Probs. (1965).Google Scholar

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21 The market definition preferred by FMG reduces IBM market share to 33% in 1972, but there are several problems with their preferred definition of the EDP market. On this point. see Leonard Weiss, The Structure-Conduct-Performance Paradigm and Antitrust, 127 U. Pa. L. Rev. 1104, 1124–30.Google Scholar

22 Brozen, supra note 7, at 93–4.Google Scholar

23 FMG push this argument a bit far, arguing simultaneously for superiority of IBM products and for declining IBM market share. One or the other of these “facts” is overstated and, as argued supra note 21, the problem is an excessively broad definition of the EDP market leading to an excessively severe decline of “market share.”Google Scholar

24 Salop, Steven, Strategic Entry Deterrence, 69 Am. Econ. Rev. 335 (1979); Robert W. Rosenthal, Games of Perfect Information, Predatory Pricing, and the Chain Store Paradox, 25 J. Econ. Theory 92 (1981); David Kreps & Robert Wilson, Reputation and Imperfect Information, 27 J. Econ. Theory 253 (1982); Paul Milgrom & John Roberts, Predation, Reputation, and Entry Deterrence, 27 J. Econ. Theory 280 (1982).Google Scholar

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33 Schumpeter, Joseph A., The Theory of Economic Development, trans. Redvers Opie (Harvard University Press, 1934). see also Drucker, Peter, Schumpeter and Keynes, Forbes, May 23, 1983, at 124.Google Scholar

34 For a discussion of the underlying economic issues, see Richard Nelson & Sidney Winter, The Schumpeterian Tradeoff Revisited, 72 Am. Econ. Rev. 114.Google Scholar

35 See, e.g., Michael Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, Woodrow Wilson School Discussion Paper in Economics no. 54 (1983).Google Scholar

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38 Several caveats should be appended to this brief discussion of experience effects. Especially, it should be mentioned that only experience with the formulation and technology that ultimately prove successful among entrants will contribute to competitive advantage. Thus, being first in an industry is beneficial only if the entrant is fortunate enough to begin with the product configuration that is ultimately successful.Google Scholar

39 Chicago critics have abetted this interpretation by identifying the central failing of 1950s and 1960s Harvard-oriented studies as their inadequate grounding in microeconomics. See Posner, supra note 18.Google Scholar

40 See the discussion by Scherer, supra note 10, at 280–85.Google Scholar

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