CARLETON UNIVERSITY Department of Economics Economics 5302 Competition Policy. Instructor: D. G. McFetridge Winter Term 2009

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1 CARLETON UNIVERSITY Department of Economics Economics 5302 Competition Policy Instructor: D. G. McFetridge Winter Term 2009 Office: A806 Loeb Building Phone: ext Office Hours: Mondays, 4:00 p.m. 5:00 p.m. and Tuesdays, 1:00 p.m. 2:00 p.m. or by appointment COURSE WEB SITE: COURSE FORMAT: Lectures: Tuesdays 2:35-5:25 pm, 219 Tory EXAMINATIONS: There will be a final examination to be scheduled by the University. In the determination of the overall final grade for the course, the final examination will have a weight of 50%. ASSIGNMENTS: Students must complete a written assignment which has a weight of 40% of their final grade. Assignments may take the form of either an analysis of a competition case decided by the Competition Tribunal or by the courts in Canada or the United States or an essay on a competition policy topic. All topics must be approved by the instructor. Assignments must be submitted by the last day of class. Students must also complete a problem set worth 10% of their grade. TEXTBOOK: Michael D. Whinston, Lectures in Antitrust Economics (MIT Press, 2008)

2 Jeffrey Church and Roger Ware, Industrial Organization: A Strategic Approach (Irwin McGraw Hill, 2000) The Church and Ware text is out of print. It can be accessed electronically at: SUPPLEMENTARY TEXTS: Jean Tirole, The Theory of Industrial Organization (MIT Press, 1989) Lynne Pepall, Daniel Richards and George Norman, Industrial Organization: Contemporary Theory and Practice Third Edition (Southwestern, 2005) Dennis Carlton and Jeffrey Perloff, Modern Industrial Organization 4th ed. (Addison Wesley, 2005) RESOURCES Web Sites Competition Bureau: Competition Tribunal: United States Department of Justice, Antitrust Division: United States Federal Trade Commission: European Commission Competition website Antitrust Modernization Commission, Report and Recommendations (May, 2007) Competition Policy Review Panel International Competition Network Economics of Networks Canadian Competition Policy Page:

3 Competition Policy Center (Berkeley): Competition Policy International Industrial Economics Institute Enforcement Guidelines Canada: United States: COURSE OUTLINE: 1. Objectives of Competition Policy Joseph Farrell and Michael Katz The Economics of Welfare Standards in Antitrust (CPC Working Paper, CPC06-061) Michal Gal, Competition Policy in Small Economies OECD CCNM/GF/COMP/WD(2003)42 Timothy J. Muris, "How History Informs Practice - Understanding the Development of Modern U.S. Competition Policy" (speech to the American Bar Association, November, 2003) William E. Kovacic and Carl Shapiro, "Antitrust Policy: A Century of Economic and Legal Thinking" (Working Paper CPC99-09) F. M. Scherer, "Some Principles for Post-Chicago Anti-trust Analysis" Case Western Reserve Law Review 52 (Fall, 2001) 2. The Evolution of Canadian Competition Policy Thomas W. Ross, "The Evolution of Competition Law in Canada" Review of Industrial Organization (April, 1998) 3. Basic Issues in Competition Policy 3.1 Legal Framework, Sanctions and Enforcement Church and Ware, Appendix

4 Whinston, Ch.1 Patrick Rey, Towards a Theory of Competition Policy IDEI Working Paper 121 (April, 2002) Office of Fair Trading, The Deterrent Effect of Competition Enforcement by the OFT OFT 962 (November, 2007) Antitrust Modernization Commission, Report and Recommendations, Ch.3 Commission of the European Community, Green Paper: Damage Actions for Breach of EC Anti-trust Rules (2005) Ken Heyer, A World of Uncertainty: Economics and the Globalization of Antitrust Antitrust Law Journal 72 (2005) 375 Mitchell Polinsky and Steven Shavell, "The Economic Theory of Public Enforcement of Law" Journal of Economic Literature 38 (March, 2000) pp The SCP Paradigm versus the New Industrial Economics Church and Ware, Ch.12 Jonathan Baker and Daniel Rubinfeld, "Empirical Methods in Antitrust: Review and Critique" American Law and Economics Review, Fall 1999, pp Market Definition Church and Ware, Ch.19 Office of Fair Trading, Quantitative Techniques in Competition Analysis, Research Paper 17, October, 1999, Ch Gregory Werden, "Demand Elasticities: An Antitrust Analysis" Antitrust Law Journal 66 (1998) pp Measurement and Interpretation of Profits Church and Ware, Ch

5 Assessing Profitability in Competition Policy Analysis, Office of Fair Trading, Economic Discussion Paper 6, July Definition and Measurement of Entry Barriers The World Bank, A Framework for the Design and Implementation of Competition Law and Policy (Washington, 1999) Annex Horizontal Agreements Whinston, Ch.2 Church and Ware, Ch.10 Tirole, Ch.6 Pepall, Richards and Norman, Ch Marc Ivaldi, Bruno Julien, Patrick Rey, Paul Seabright and Jean Tirole, The Economics of Tacit Collusion (Final Report for DG Competition, European Commission, March, 2003) Andrew Dick, When are Cartels Stable Contracts? Journal of Law and Economics 39 (April, 1996) Andrew Dick, If Cartels were Legal, When Would Firms Fix Prices? in Peter Grossman ed., How Cartels Endure and How They Fail: Studies of Industrial Collusion (Edward Elgar, 2004) Stephen Martin, Competition Policy, Collusion and Tacit Collusion International Journal of Industrial Organization 24, 2006, pp Nicolas de Roos, Examining Models of Collusion: The Market for Lysine International Journal of Industrial Organization 24, 2006, pp Charles Thomas and Robert Willig, The risk of contagion from multi-market contact International Journal of Industrial Organization 24, 2006, pp Mergers Whinston, Ch.3 Church and Ware, Ch.23

6 Pepall, Richards and Norman, Ch.16 Marc Ivaldi, Bruno Julien, Patrick Rey, Paul Seabright and Jean Tirole, The Economics of Unilateral Effects (Interim Report for DG Competition, European Commission, November, 2003) Office of Fair Trading, Merger Appraisal in Oligopolistic Markets Research Paper 19, November 1999, Ch. 3, 4. David T. Scheffman and Mary Coleman, "Quantitative Analyses of Potential Competitive Effects from A Merger" available at: Office of Fair Trading, Quantitative Techniques in Competition Analysis Research Paper 17, October 1999, Ch. 4. Carl Shapiro, Mergers with Differentiated Products, (speech to the American Bar Association, 1995) Roy J. Epstein and Daniel Rubinfeld "Merger Simulation: A Simplified Approach with New Applications" (Working Paper CPC01-26) Also in Antitrust Law Journal 69, 2001, pp Gregory Werden, "A Robust Test for Consumer Welfare Enhancing Mergers Among Sellers of Differentiated Products" The Journal of Industrial Economics 64 (December, 1996) pp Lin Bian and Donald G. McFetridge, "The Efficiencies Defence in Merger Cases: Implications of Alternate Standards" Canadian Journal of Economics 33 (May, 2000) pp Dominance Whinston, Ch.4 Church and Ware, Ch.20 Patrick Rey and Jean Tirole, A Primer on Foreclosure (IDEI, January, 2006) David T. Scheffman and Richard S. Higgins, "20 Years of Raising Rivals' Costs: History, Assessment, and Future"

7 Office of Fair Trading, Selective Price Cuts and Fidelity Rebates (July, 2005) Patrick Greenlee and David Reitman, Distinguishing Competitive and Exclusionary Uses of Loyalty Discounts Antitrust Bulletin 50 (Fall, 2005) pp Richard Gilbert and Michael Katz, "An Economists Guide to Microsoft" Journal of Economic Perspectives 15, (Spring 2000) pp also (Working Paper, CPC01-19) Benjamin Klein, "The Microsoft Case: What can a Dominant Firm do to Defend its Position?" Journal of Economic Perspectives 15, (Spring, 2000) pp Michael Winston, "Exclusivity, Tying and U.S. v. Microsoft: What We Know and What We Don't Know" Journal of Economic Perspectives 15, (Spring, 2000) pp Carl Shapiro, "Aftermarkets and Consumer Welfare: Making Sense of Kodak," Antitrust Law Journal, 63, 1995, pp Dennis W. Carlton, "A General Analysis of Exclusionary Conduct and Refusal to Deal - Why Aspen and Kodak are Misguided" Antitrust Law Journal, 68, 2001, pp Michael D. Whinston, "Tying, Foreclosure and Exclusion" American Economic Review 80 (September, 1990) pp Price Discrimination Church and Ware, Ch.5 Tirole, Ch.3 8. Predatory Pricing Church and Ware, Ch.21 Tirole, Ch.9 Pepall, Richards and Norman, Ch William J. Baumol, "Predation and the Logic of the Average Variable Cost Test" The Journal of Law and Economics 39 (April, 1996) Patrick Bolton, Joseph F. Brodley, and Michael H. Riordan, "Predatory Pricing: Strategic Theory and Legal Policy" The Georgetown Law Journal 88 (2000) pp

8 Patrick Bolton, Joseph F. Brodley, and Michael H. Riordan, "Predatory Pricing: Response to Critique and Further Elaboration" The Georgetown Law Journal 89 (August, 2001) D. G. McFetridge, "The Commissioner of Competition v. Air Canada: Phase I" 9. Vertical Restrictions Whinston, Ch.4 Church and Ware, Ch.22 Tirole, Ch.4 Jean Tirole, The Analysis of Tying Cases: A Primer Competition Policy International 1 (Spring, 2005) Keith Hylton and Michael Salinger, Tying Law and Policy: A Decision Theoretic Analysis Boston University School of Law, Working Paper Series, Law and Economics Working Paper No James Cooper, Luke Froeb, Daniel O Brien and Michael Vita, Vertical Restrictions and Antitrust Policy: What About the Evidence? Competition Policy International 1, (Autumn, 2005) Ralph Winter, Vertical Restraints and Antitrust Policy: A Reaction to Cooper, Froeb, O Brien and Vita Competition Policy International 1, (Autumn, 2005) Frank Mathewson and Ralph Winter, "The Law and Economics of Resale Price Maintenance" Review of Industrial Organization (April, 1998) Paul Dobson and Michael Waterson, Vertical Restraints and Competition Policy, Office of Fair Trading, Research Paper 12, December, Douglas Berheim and Michael Whinston, Exclusive Dealing Journal of Political Economy 106 (1998) pp Joseph Farrell, Deconstructing Chicago on Exclusive Dealing Antitrust Bulletin 50 (Spring, 2005) pp Intellectual Property

9 Church and Ware, Ch.18 Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (October, 2003) Innovation and Competition Policy: Part 1, Conceptual Issues Office of Fair Trading, Economic Discussion Paper 3, March 2002 Carl Shapiro, Competition Policy and Innovation (OECD, DSTI/DOC(2002)11)