Three Economist’s Tools for Antitrust Analysis: A Non-Technical Introduction

The importance of economics to the analysis and enforcement of competition policy and law has increased tremendously in the developed market economies in the past forty years. In younger and developing market economies, competition law itself has a history of twenty to twenty-five years at most – sometimes much less – and economic tools that have proven useful to competition law enforcement in developed market economies in focusing investigations and in assisting decision makers in distinguishing central from secondary issues are inevitably less well understood. This paper presents a non-technical introduction to three economic tools that have become widespread in competition law enforcement in general and in the analysis of proposed mergers in particular: critical loss analysis, upward pricing pressure, and the vertical arithmetic

Two Contexts for Economics in Competition Law - Justifying Competition Law in the Face of Consumers' Bounded Rationality - Deterrence Effects and Competitive Effects

Competition law accommodates two different contexts within which economics may be applied, each defined by a distinct type of cause-effect relationships. First, there are effects of competition law on business conduct (deterrence effects), embodying the fact that businesses take into account legal sanctions when planning their actions. The field studying these effects is Economic Analysis of Law. Second, there are effects of business conduct on competition (competitive effects), which occur through the influence of businesses with market power on behaviour of their customers, suppliers and competitors. This influence falls within the ambit of Industrial Organization. Awareness of the distinction makes it possible to appreciate certain aspects of the application of economics to competition law issues. For instance, within the discourse on this application, the context of competitive effects receives significantly more attention than the context of deterrence effects. Also the often voiced observation that economics and competition law are closely related regards predominantly the former context