INTRODUCTION TO THE ECONOMICS OF ANTITRUST

ASSUMPTIONS OF CLASSICAL ECONOMICS PEOPLE ACT RATIONALLY TO MAXIMIZE THEIR OWN INTERESTS

ASSUMPTIONS OF CLASSICAL ECONOMICS PEOPLE ACT RATIONALLY TO MAXIMIZE THEIR OWN INTERESTS RESOURCES MOVE TO MOST VALUABLE USE IF VOLUNTARY EXCHANGE PERMITTED

VALUE MEASURED BY AGGREGATE CONSUMER WILLINGNESS TO PAY FOR THINGS

EFFICIENCY EXPLOITING ECONOMIC RESOURCES TO MAXIMIZE VALUE

PROBLEMS WITH ASSUMPTIONS DEFINITION OF VALUE PEOPLE OFTEN IRRATIONAL

PROBLEMS WITH ASSUMPTIONS DEFINITION OF VALUE –CONSUMER CULTURE –DEPENDS ON INCOME DISTRIBUTION –MORE $ = MORE VOTES

PROBLEMS WITH ASSUMPTIONS PEOPLE OFTEN IRRATIONAL –OFTEN APPEAR TO ACT AGAINST SELF-INTEREST –OFTEN PERCEIVE SELVES ACTING AGAINST SELF- INTEREST

DEMAND CURVE : GENERALLY BUY MORE OF GOOD THE LESS IT COSTS

DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS SUBSTITUTION EFFECT INCOME EFFECT

DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS SUBSTITUTION EFFECT: AS GOOD BECOMES CHEAPER, BUY IT INSTEAD OF ALTERNATIVES INCOME EFFECT

DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS SUBSTITUTION EFFECT INCOME EFFECT: AS GOOD BECOMES CHEAPER, PURCHASING POWER INCREASES, SO BUY MORE

DEMAND

DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS : INFERIOR GOODS LUXURY GOODS

DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS: INFERIOR GOODS: GOODS YOU BUY MORE OF, THE LESS $ YOU HAVE LUXURY GOODS

DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS: INFERIOR GOODS LUXURY GOODS: GOODS YOU BUY BECAUSE OF THE HIGH PRICE

FACTORS AFFECTING DEMAND PERSONAL TASTE INCOME PRICE OF COMPLEMENTARY GOODS PRICE OF SUBSTITUTES

FACTORS AFFECTING DEMAND PERSONAL TASTE INCOME PRICE OF COMPLEMENTARY GOODS PRICE OF SUBSTITUTES

FACTORS AFFECTING DEMAND PERSONAL TASTE INCOME PRICE OF COMPLEMENTARY GOODS PRICE OF SUBSTITUTES

FACTORS AFFECTING DEMAND PERSONAL TASTE INCOME PRICE OF COMPLEMENTARY GOODS PRICE OF SUBSTITUTES

DEMAND

TYPES OF PRODUCER COSTS FIXED v.VARIABLE COSTS TOTAL v. AVERAGE COSTS MARGINAL COST

FIXED v. VARIABLE COSTS FIXED COSTS: DO NOT VARY IN SHORT RUN VARIABLE COSTS

FIXED v. VARIABLE COSTS FIXED COSTS: DO NOT VARY IN SHORT RUN VARIABLE COSTS: VARY WITH LEVEL OF PRODUCTION

TOTAL v. AVERAGE COST TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE AVERAGE COST

TOTAL v. AVERAGE COST TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE AVERAGE COST: MEAN COST PER ITEM PRODUCED

TOTAL v. AVERAGE COST TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE AVERAGE COST: MEAN COST PER ITEM PRODUCED –AVERAGE TOTAL COST –AVERAGE VARIABLE COST

MARGINAL COST = ADDITIONAL COST OF PRODUCING ONE MORE UNIT

ALL COSTS INCLUDE NORMAL PROFIT

SUPPLY CURVE = MARGINAL COST CURVE FOR INDUSTRY AS A WHOLE

SUPPLY & DEMAND

FACTORS AFFECTING SUPPLY CURVE TECHNOLOGICAL CHANGE

FACTORS AFFECTING SUPPLY CURVE TECHNOLOGICAL CHANGE INPUT PRICES

SUPPLY & DEMAND

PRODUCERS GOAL MARGINAL REVENUE = MARGINAL COST

PRODUCERS GOAL IN COMPETITIVE MARKET MARGINAL REVENUE = PRICE = MARGINAL COST

SUPPLY & DEMAND

OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM FUNGIBLE PRODUCT SUPPLIERS CANT AFFECT EACH OTHERS PRICING/OUTPUT MOBILITY/EQUALITY OF RESOURCE AVAILABILITY GOOD INFORMATION/LOW TRANSACTION COSTS

OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM FUNGIBLE PRODUCT SUPPLIERS CANT AFFECT EACH OTHERS PRICING/OUTPUT MOBILITY/EQUALITY OF RESOURCE AVAILABILITY GOOD INFORMATION/LOW TRANSACTION COSTS

OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM FUNGIBLE PRODUCT SUPPLIERS CANT AFFECT EACH OTHERS PRICING/OUTPUT MOBILITY/EQUALITY OF RESOURCE AVAILABILITY GOOD INFORMATION/LOW TRANSACTION COSTS

OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM FUNGIBLE PRODUCT SUPPLIERS CANT AFFECT EACH OTHERS PRICING/OUTPUT MOBILITY/EQUALITY OF RESOURCE AVAILABILITY GOOD INFORMATION/LOW TRANSACTION COSTS

OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM FUNGIBLE PRODUCT SUPPLIERS CANT AFFECT EACH OTHERS PRICING/OUTPUT MOBILITY/EQUALITY OF RESOURCE AVAILABILITY GOOD INFORMATION/LOW TRANSACTION COSTS

SUPPLY AND DEMAND

SUPPLY & DEMAND

ELASTICITY (SENSITIVITY TO PRICE CHANGES) % CHANGE IN OUTPUT NECESSITATED BY 1% CHANGE IN PRICE

ELASTICITY > 1 DEMAND IS ELASTIC CONSUMERS RESPONSIVE TO PRICE CHANGES GOOD SUBSTITUTES EXIST

ELASTICITY < 1 DEMAND IS INELASTIC CONSUMERS UNRESPONSIVE TO PRICE CHANGES FEW GOOD SUBSTITUTES

TOTAL REVENUE/DEMAND

MONOPOLY: PROBLEMS HIGH PRICES LOWER OUTPUT WEALTH TRANSFER (?) DEADWEIGHT LOSS

BARRIERS TO ENTRY LIMITED ACCESS TO KEY RESOURCES GOVERNMENT REGULATION HIGH FIXED COSTS BRAND LOYALTY

MONOPOLY: PROBLEMS HIGH PRICES LOWER OUTPUT WEALTH TRANSFER (?) DEADWEIGHT LOSS PREDATORY CONDUCT RENT-SEEKING BEHAVIOR

MARKET DEFINITION:TIPS FOCUS: DEFENDANTS PRODUCT

MARKET DEFINITION:TIPS FOCUS: DEFENDANTS PRODUCT ADD OTHERS NECESSARY TO GET MARKET POWER

MARKET DEFINITION:TIPS FOCUS: DEFENDANTS PRODUCT ADD OTHERS NECESSARY TO GET MARKET POWER PRODUCT & GEOGRAPHIC MARKETS

MARKET DEFINITION:TIPS FOCUS: DEFENDANTS PRODUCT ADD OTHERS NECESSARY TO GET MARKET POWER PRODUCT & GEOGRAPHIC MARKETS TRY SEVERAL ALTERNATIVES

MARKET DEFINITION:TIPS FOCUS: DEFENDANTS PRODUCT ADD OTHERS NECESSARY TO GET MARKET POWER PRODUCT & GEOGRAPHIC MARKETS TRY SEVERAL ALTERNATIVES ART NOT SCIENCE

MARKET DEFINITION: FACTORS