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Unilateral practices
MONOPOLY AND INEQUALITY
by William S. Comanor* and Takahiro Miyao°   I.  Since its inception as an independent discipline, economics has probed the major policy issues of the day. The questions that aroused its practitioners were those that presented society with critical choices.  So it is today with our recognition of the growing divide between rich and poor. For a generation, economists had primarily emphasized the goal of economic efficiency and paid far less attention to distributive outcomes.  To be sure, studies were published which addressed the latter concerns,[1] but they were widely ignored in discussions of advanced economies.[2]    More recently, however, as the extent of inequality became increasingly apparent, important volumes appeared, particularly those by Stiglitz, Frank and Piketty.[3] For a generation, economists had primarily emphasized the goal of economic efficiency and paid far less attention to distributive outcomes.  To be sure, studies were published which addressed the latter concerns,[1] but they were widely ignored in discussions of advanced economies.[2]    More recently, however, as the extent of inequality became increasingly apparent, important volumes appeared, particularly those by Stiglitz, Frank and Piketty.[3]  The most prominent of these volumes is that by Piketty, who called attention to the critical importance of non-labor income in leading to unequal outcomes.  Although widely disparate wages may promote inequality, he emphasized the returns to capital as the primary facotor. Piketty’s “Fundamental
Mergers
Is Antitrust about the Present or Cloudy Expectations of the Future? A Consideration of the Comcast – Time Warner Cable Merger
Introduction The question posed above lies at the heart of many antitrust decisions. Since these actions, particularly when opposed, often take long periods of time before resolution, any remedies imposed will become operative only in the future. On this account, it is tempting to consider future market conditions before making enforcement decisions. The problem of course is that “the future is not ours to see.” While we can make guesses about future market conditions, they are often wrong. There are countless examples of industry participants unable to predict future circumstances in their own markets. In that case, it might be better just to stick to the present as an implicit projection of the future. This question is particularly relevant in high tech industries where innovation and new products are constant themes. Even if antitrust violations in the current marketplace can be demonstrated and reversed, it might not matter if the existing product and services are soon obsolete. As discussed below, this question lies at the heart of the policy debate surrounding the proposed Comcast – Time Warner Cable (TWC) merger. The Relevant Markets In its early days, cable television was designed to bring broadcast television signals into places where over-the-air reception was limited. However, it has long surpassed that early purpose. Not only does it now distribute video programming that is only available via cable transmission but also it has become a major conduit
Mergers
Airline Mergers, Network Effects and Competition Policy
Airlines serve individual city-pair markets by constructing a network of flights where what happens in one market necessarily affects what happens in another.   These effects become particularly evident when bad weather strikes and poor flying conditions in one place lead to canceled flights elsewhere.  Yet network effects are generally ignored by antitrust enforcement authorities when evaluating proposed airline mergers.  In this article, I outline both the factors behind and some costs resulting from this amnesia. Economic markets are traditionally defined by price effects, whether in terms of cross elasticities of demand and supply or by the pricing ability of a hypothetical monopolist who controls all of the market’s supply.  What matters in both constructs is how buyers respond to increased prices and how firms set prices accordingly.  By following this approach, one finds wide agreement that airline markets should be evaluated by conditions within particular city-pairs.[1]  That is where prices are set and where consumer welfare in terms of relative prices is measured. Modern policy-makers have adopted this approach and acted accordingly.  What matters to them are the anticipated effects of a particular merger on prices; other considerations, such as those pertaining to quality levels, are largely ignored.  Included in this latter category are factors derived from network effects.  That approach is justified by the presumption that profit-making firms will organize their