Industrial Concentration and the Chicago School of Antitrust Analysis

Front matter

HOHENHEIMER VOLKSWIRTSCHAFTLICHE SCHRIFTEN

Jan B. Rittaler

Industrial Concentration and the Chicago School of Antitrust Analysis

Preface

After completion of this doctoral thesis which was submitted to the Faculty of Economics and Social Sciences at the University of Hohenheim in June 1988, the author feels obliged to express some acknowledgments. Without the help of the subsequently mentioned scholars, colleagues, consultants, and friends the contribution and the author’s well-being would surely have suffered a variety of shortcomings and defects. The author feels proud to be responsible for the remaining errors.

Prof. Dr. Klaus Herdzina and Prof. Dr. Lothar Vollmer contributed basic insights into antitrust law and economics on which the major part of the thesis is based and they assisted in the examination and administration procedure. This applies also and particularly for UnivProf. Dr. Ingo L.O. Schmidt who has - in addition to that - spent valuable leisure time (which he otherwise would probably have spent with his family or in research) in having the thesis under his care. I am thus especially indebted to him.

My dear colleagues, Drs. Harald Lob, Ulrich Kirschner, Heinrich Pascher, Diplom-Volkswirt Stefan Elßer and Diplom-Volkswirt Heinrich-Josef Engelke have created the "ambiente" and "spirits" necessary for a creative completion of the work. This applies especially for Dr. Kirschner with whom I formed a strong duopson applying a concept of countervailing power. Self-evidently my present colleagues went to school on the encompassing experience perceived and transmitted by our former colleagues, Drs. Wolfgang Krüger and Helmut Witkowski.

Frau Renate Strobel won my applause for never loosing her charming kind and her good sense of humour - even in the most critical moments. This made her a real life-saver. She was assisted by Frau Renate Dietrich.

The author owes a debt to Dr. Peter Fenn, B.A., M.A., who polished up the final draft through his outstanding language abilities and thus enriched the foundation which was mainly laid by Dr. Hansjörg Meyer. It was also through their encouragement that the author decided to run the risk of writing his dissertation in a language other than his native one.

The willingness of my parents to provide the necessary background for my education must be emphasized particularly here. My gratitude for this may not be expressed sufficiently just by words.

Last, but definitely not least, I would like to acknowledge gratefully the encouragement, patience, and emotional help of my fiancée and future spouse Marina Robitschek. She often had to fight the unexpected obstacles and problems a dissertation brings along in the personal sphere. Her endurance resulted in a strong spill-over effect.

J.B.R.

Stuttgart-Hohenheim, October 1988

Jan B. Rittaler - 978-3-631-75388-0 Downloaded from PubFactory at 01/11/2019 05:36:55AM via free access

Jan B. Rittaler - 978-3-631-75388-0 Downloaded from PubFactory at 01/11/2019 05:36:55AM via free access

Table of Contents

Introduction: Antitrust Economics, Policy, and Law at the Crossroads:

A Reorlentation scsncseesccsinenccscsinsvstnaisessnseedccswacnsbecaqesscuctasesessnmancanes 1

Le. [hë Contest ee eine 1 t: Antitrust ECONOMICS. seen een 4

Part 1: Analytical Framework for the Evaluation of Restraints

I. Er nterprise System, Competition, an UbHe POliCyY ine 31 3. Competition and Public Policy „neuen 36 II. j val ion_of strial centr T li PONY - cirossstnnneustebiniunssadusudsecadeceensedevers 39 b. Conflicting Objectives near 42

Jan B. Rittaler - 978-3-631-75388-0 Downloaded from PubFactory at 01/11/2019 05:36:55AM via free access

II

2. Elements of the Approach to an Evaluation of Industrial

Concentration ae un ccncateudiocwbvedsunewe 44 a. Models of Competition ..rcocccccccsceses EI RERERER ent

b. The Structure-, Conduct-, Performance-Paradigm, and the

3. The Treatment of Competition Impairment and Public Policy

Alternatives naeh 60 a. ABPTOSChEE ana 61 Di, Rules asien swtenasdautiupbyeseuens® 62 III. Competition dustri neentration scannen 64 1. Concentration and Economic Theory .zeessensansnunnnnnonunnnsansnnenonnunnnnnannannune 64 85: Significance ee era 71 bb. CAUSES: near 76 Ce, -Effects neue 80 aa. Interna GrOWtH nennen 83 bb; External Growth ui 83 (1) Horizontal MergerS ea aan 84

Jan B. Rittaler - 978-3-631-75388-0 Downloaded from PubFactory at 01/11/2019 05:36:55AM via free access iil

Jan B. Rittaler - 978-3-631-75388-0 Downloaded from PubFactory at 01/11/2019 05:36:55AM via free access

. In rrent Debate on The Goals of Antitrust: Economics or SOCIQDOUUICS 2 pspetaseadeticnidraasidesadunesnsadwacnvadssuvceisewsssenchossisuantsteanecinteeeunseniaocs 99 2. Evidence of the Goals of AntitrUSt nn a 107 c. Plausibility ConsiderationS nenne 113 4. The German Case... see 117 II. Methodology and Theoretical Model Underlying the Evaluation 1. The General Methodology of Analysis ...ccscccccesccccccccenssvsccccescccccnuseusanae 120 a. Neoclassical Price Theory as an Instrument of Analysis assesses... 120 b. Price/Quantity-Interrelations as Indicators of Consumer WEITArE inurl ea ee Tee E 124 a. Consumer Welfare and Efficiency: Remarks on Interdependence swiisiseciciwansindsarancnsannerednsaneleravaenidaasiactaimiusersoeusneans 130 d. Qualifications To the Model „une nennen 137 aa. Premises and ASSUMPTIONS ...ss.s.ssssssusenousonsosnossessaorssuerssunsessaase 137 cë; Allocativèe Efficiency vun 140 dd. Productive Efficiency zen 142 ee. Transfer of Wealth nina 146 2. The Meaning, Definition, and Importance of Barriers to New BOMDEL TION nein 152 4. Kinds of Barriers to New Competition and their Sources:

IV a. Structural Barrier anne 160 cc. Product Differentiation Advantages ....es..ssssesoecsosescossssosoooasasase 167

b: Strategic Barriers sen 173 d: Barriers tOo Exit au 179

IV. Concluding Remarks sis een 184