The Economic Problem of Fixed Costs and What Legal Research Can Contribute

The antitrust laws demand competition but, in general, no competitive outcome is possible in markets characterized by substantial fixed costs. Consequently, restrictions on competition may have an efficiency defense, and a prohibition of cartel agreements may entail costs as well as benefits. Giving...

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Veröffentlicht in:Law & social inquiry 1989-10, Vol.14 (4), p.739-762
1. Verfasser: Bittlingmayer, George
Format: Artikel
Sprache:eng
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Zusammenfassung:The antitrust laws demand competition but, in general, no competitive outcome is possible in markets characterized by substantial fixed costs. Consequently, restrictions on competition may have an efficiency defense, and a prohibition of cartel agreements may entail costs as well as benefits. Giving examples, this essay illustrates the problem that fixed costs pose for competition, long recognized in economics, and discusses implications for real-world industries. The author addresses Wiley's recent criticism of theoretical and empirical work on the fixed cost problem and outlines an agenda for legal research that can help illuminate the underlying economic and antitrust policy issues posed by industries with high fixed costs.
ISSN:0897-6546
1747-4469
1545-696X
DOI:10.1111/j.1747-4469.1989.tb00003.x