Silviase/jgov_v1.4_full_ann huggingface dataset:
second choices and also the extent to which all other firms are distant third choices.

2. Vertical relationships and restraints.

The "Harvard" IO tradition that produced the S-C-P paradigm was (at least prior to the 1970s) largely hostile toward vertical relationships (including vertical mergers between a supplier and a customer) and vertical restraints, such as tying, bundling, exclusive dealing, requirements contracts, full-line forcing, territorial restraints, and resale price maintenance (RPM). $ ^{40} $ This approach saw these vertical relationships and restrictions either as manifestations of market power or as instruments for the enhancement of the exercise of market power. $ ^{41} $

The "Chicago" IO tradition, however, by the late 1950s was offering an alternative and far more benign view of these vertical relationships and restraints. Although acknowledging that they could sometimes be used for the purposes of cartel formation, the Chicago-oriented writers instead emphasized the efficiency-enhancing aspects of these practices. $ ^{42} $

Consistent with the harsh "Harvard" view, the antitrust enforcement agencies and the Supreme Court (in its antitrust legal decisions) prior to the mid 1970s were generally hostile toward vertical mergers and vertical restraints. From the mid 1970s onward, however, the enforcement
agencies and the Supreme Court moved to a far more benign view of these practices -- recognizing potential anticompetitive possibilities but also recognizing the efficiency-enhancing possibilities. $ ^{43} $ As of early 2008, the enforcement agencies are far more cautious in their choice of cases for prosecution, and the Supreme Court has declared that almost all vertical restraints should be judged under a "rule of reason" approach, where potential benefits are weighed against potential anticompetitive effects, $ ^{44} $ rather than under a "per se" approach, where a practice is automatically condemned and the plaintiff need only show that the defendant did actually engage in the alleged practice. $ ^{45} $

3. Predatory pricing. Prior to the 1970s the antitrust authorities and the courts were unduly concerned about predatory pricing (as well as about price discrimination, where predation claims often were lurking). $ ^{46} $ Common to enforcement actions and to judicial decisions were allegations of "pricing below cost", where "below cost" was either vaguely defined or was defined as below average costs -- which, for any multi-product firm, also meant using some arbitrary method of distributing joint costs across multiple products, such as using the relative sales revenues of the various products as the relative weights.

Academic work to clarify predatory issues, and to cast doubt on the empirical frequency of
predation, began at "Chicago" in the late 1950s. $ ^{47} $ The paradigm of envisioning predation as an "investment" (an initial sacrifice) and then a subsequent recoupment period (higher prices permitting a profits return on the initial investment) became clear. As part of this paradigm, it also became clear that barriers to entry were a necessary component for success of this strategy; otherwise, entry would foil the predator's recoupment efforts; and to the extent that a would-be predator faced conditions of easy entry, attempted predation would not be a rational strategy. $ ^{48} $

Building on this base, Areeda and Turner offered a powerful critique of existing legal thought and court decisions and offered a proposal that pricing at or above marginal cost (with average variable cost serving as a proxy for the usually unmeasurable marginal cost) should generally be considered as a "safe harbor" for firms that were being accused of engaging in predatory pricing. This proposal subsequently became known as the "Areeda-Turner rule". $ ^{49} $

Subsequent Supreme Court decisions were clearly influenced by the investment-plus-recoupment paradigm and the price-above-marginal-cost test. $ ^{50} $

At about the same time that economists in the antitrust area were clarifying notions of
predation, economists in regulatory areas were writing about similar issues in the domain of price regulation and were nudging regulatory criteria and regulatory decisions away from the use of fully distributed costing methods (i.e., the process of allocating joint costs in some arbitrary fashion across multiple products) and instead toward the use of incremental costs. $ ^{51} $

C. Important improvements that are still needed in U.S. antitrust policy.

Antitrust policy in the U.S. has certainly not reached "nirvana". Improvements are still needed, so as to bring antitrust policy even more closely in line with economic efficiency (and economic growth), and economists can surely contribute to the development of these improvements. There are at least four areas that are worth exploring:

1. Taking efficiencies into account in merger cases. The analytical basis for taking into account the tradeoffs between the potential efficiencies that a merger may offer and the loss of welfare that the heightened market power of the merger may create has been known for at least 40 years. $ ^{52} $ But efficiency improvements from a merger are easy to promise but may be difficult actually to deliver; and "unscrambling the eggs" of a merger a few years after it has been approved and the promised efficiencies have failed to arrive may be difficult or impossible. In addition, even the measurement of whether the promised efficiencies have actually appeared may be difficult.

Perhaps creative economics thinking can yield an incentive-compatible mechanism for inducing the merger proponents to provide their best estimate of the prospective efficiency gains from the proposed merger rather than providing just their wishful thinking or their fanciful efforts to offset the concerns of the enforcement agencies as to the adverse consequences of the possible exercise of market power.

2. A more nuanced approach to unilateral predatory behavior. As was discussed above,
current antitrust decisions portray predation as a narrow strategy of an initial investment in below-marginal-cost pricing followed by a recoupment period of higher prices and profits after the target firm departs from the market. Lost in this approach are strategic issues that extend beyond the immediate market and time period. For example, the would-be predator may not recoup its investment solely in this market and this time period. Suppose, for example, that by pricing its product at levels that are below marginal costs the firm gets a reputation for being overly aggressive. In this case, other firms might be more reluctant to enter during the attempted recoupment period; in essence, the predatory act itself might raise barriers to entry. Or this bout of predatory behavior might chasten or "discipline" firms that might otherwise become "maverick" price-cutters, thereby yielding higher long-run profits for the initiating firm. Or the predatory behavior in one (product or geographic) market may gain the firm a reputation for being aggressive that pays off in other markets through reduced entry or disciplined behavior in those other markets. $ ^{53} $

Further, the narrow investment-plus-recoupment paradigm has proved difficult to apply to allegations of non-price predatory behavior (e.g., expansions of capacity or applications of various kinds of vertical restraints). $ ^{54} $ And the issue of "bundled discounts" and whether they constitute a serious problem of predation is currently roiling antitrust discussion in the U.S. $ ^{55} $

Clear economics thinking can surely help in this area. One promising line of thought that should be pursued is the concept of "no economic sense": that a price or non-price action should be
condemned as predatory (i.e., as anticompetitive) if it made no economic sense for the firm undertaking it unless the target firm disappeared from the market or would otherwise be disciplined. $ ^{56} $

3. Market definition in monopolization cases. As was discussed above, for antitrust merger analysis the Merger Guidelines have embodied a robust paradigm for market definition. Unfortunately, the same cannot be said for monopolization cases. The crucial difference is that the antitrust analysis in merger cases is asking a prospective question -- will this merger create or enhance market power? -- so that the "SSNIP test" is the appropriate question. By contrast, in most monopolization cases the usual allegation is that the defendant already has market power, and the plaintiff wants the court to enjoin the defendant from acts (e.g., vertical restraints, or predatory pricing) that have allowed it to achieve or enhance that market power and/or enjoy the fruits of that market power. The defendant, of course, will deny that it has market power.

In this context, the SSNIP test cannot be used, because neither a truly competitive firm nor a true monopolist would find it worthwhile to raise its price from its current level (at which, presumably, it is already maximizing its profits). $ ^{57} $ Prior to the 1980s, accounting profitability measures would have been offered as support for the existence of market power. But substantial doubt was subsequently cast on the use of accounting profitability measures as indicators of market power, $ ^{58} $ and
accounting measures of profitability have been used much more sparingly since then in antitrust cases. Perhaps creative thinking can yield a paradigm breakthrough in this area, as it did for mergers. $ ^{59} $

4. Determining the appropriate stringency for antitrust merger policy. Are the DOJ and the FTC drawing the right "lines" as to the decisions with regard to which mergers should be challenged and which should be approved? The general proposition -- based on the S-C-P paradigm -- that higher levels of seller concentration (and higher barriers to entry, etc.) increase the likelihood of the exercise of market power has strong empirical support. $ ^{60} $ Nevertheless, it is clear that there are low levels of seller concentration at which the likelihoods of post-merger market power are quite low, and thus mergers among sellers would be harmless from a market power perspective and could create efficiencies -- and enhance economic growth -- and therefore should be approved; and there are high levels of seller concentration at which the likelihoods of the post-merger exercise (or enhancement) of market power are high and the prevention of mergers is consistent with the maintenance of overall market efficiency. But where should the appropriate line(s) be drawn, and is current merger policy at the right place?

The answers to these questions cannot be learned from examining the number of merger challenges per year, or examining the characteristics of the mergers that were challenged or of the mergers that were successfully challenged (since one can never know the "counter-factual" with respect to these mergers). But post-merger pricing studies of those mergers that are allowed to proceed -- especially the "close calls" -- should yield interesting information. These "close calls" would reasonably be represented by those mergers in which the merger partners are asked by the enforcement agencies for additional information $ ^{61} $ but the mergers are eventually permitted to proceed.
If the studies indicate that post-merger prices tend to increase significantly (cet. par.), then merger policy has been too lax and should be tightened (e.g., by lowering the HHI threshold at which a merger is likely to be challenged); if the studies indicate that post-merger prices do not rise, then merger policy may be too stringent (or might be "just right").

The DOJ and the FTC have the pre-merger data that would provide the baselines for these studies; they would be in the best positions to do the post-merger follow-up studies; and the economists in those agencies would surely be the most qualified personnel to do the statistical (econometric) work that would be necessary.
### V I. Conclusion

It is clear that competition policy has an important role to play in the promotion of economic growth in a modern economy; but that role should neither over-sold nor under-sold. Competition policy is not a magical cure-all for anything that ails an economic system; and there are clearly other important influences on the growth rate of a modern economy. Nevertheless, competition policy clearly does play an important role: directly, because of competition policy's emphasis on competitive markets and the efficiencies that flow therefrom, which surely encourage economic growth; and indirectly, because of the "markets" mindset that accompanies competition policy and because competition policy can encourage efficient financial markets, which in turn encourage the saving and efficient investment that themselves are important contributors to growth.

Good competition policy, unfortunately, is not an automatic choice for many economies. "Industrial policy", with its underlying foundation resting on the belief that the government can somehow better pick winners and losers than can markets, often stands counterpoised to the markets orientation of competition policy. Although the problems of significant externalities and asymmetric information often do justify extra-market interventions by government (since competition policy is simply not equipped to handle such "market failure" problems), the course of industrial policy usually goes far beyond such remedying interventions (although the proponents of industrial policy may sometimes wrap their arguments in the language of market failures). The powerful rent-seeking and political capture models of modern political economy are a better explanation for what really lies at the base of industrial policy. $ ^{62} $ Competition policy and industrial policy are thus likely to continue to stand in tension with each other as modern economies develop and mature.

Good competition policy should not stay stagnant but should adapt as circumstances change and especially as economics thinking evolves. In the U.S. there has been a substantial history of the influence of economics and economists on antitrust policy, most of it for the good. Economics and
economists clearly have contributed to three specific and important antitrust accomplishments in recent decades: improved antitrust merger analysis, improved antitrust treatment of vertical mergers and vertical restraints, and improved understanding of predatory pricing. But there are still important advances and adaptations in antitrust policy to which economics and economists can surely contribute, so as to make competition policy an even better contributor to economic growth.

As is true in many other policy areas, the tasks of good competition policy economists are never finished.
## References

Ackerman, Bruce A. and William T. Hassler. Clean Air and Dirty Coal. New Haven, Conn.: Yale University Press, 1981.

Adelman, Morris A., "The A & P Case," American Economic Review, 39 (May 1949), pp. 280-283.

Adelman, Morris A., "Economic Aspects of the Bethlehem Opinion," Virginia Law Review, 45 (1959), pp. 684-696.

American Bar Association (ABA), "Report of the ABA Commission to Study the Federal Trade Commission," September 15, 1968; reprinted in Journal of Reprints for Antitrust Law and Economics, 1 (Winter 1969), pp. 885-1009.

Antitrust Modernization Commission (AMC), Report and Recommendations. Washington, D.C.: AMC, April 2007.

Areeda, Phillip E. and Herbert Hovenkamp, Fundamentals of Antitrust Law. New York: Aspen, 2004.

Areeda, Phillip E., Louis Kaplow, and Aaron S. Edlin, Antitrust Analysis: Problems, Text, Cases. New York: Aspen Publishers, 2004.

Barnett, Thomas O., "Competition Law and Policy Modernization: Lessons from the U.S. Common-Law Experience," Presentation to the Lisbon Conference on Competition Law and Economics, Lisbon, Portugal, November 16, 2007; available at: http://www.usdoj.gov/atr/public/speeches/227755.htm

Baumol, William J., "Reasonable Rules for Rate Regulation: Plausible Policies for an Imperfect World," in Almarin Phillips and Oliver E. Williamson, eds., Prices: Issues in Theory, Practice, and Public Policy. Philadelphia: University of Pennsylvania Press, 1968, pp. 101-123.

Baumol, William J., "Quasi-Permanence of Price Reductions: A Policy of Preventing Predatory Pricing," Yale Law Journal, 87 (November 1979), pp. 1-26.

Baumol, William J. and Alfred G. Walton, "Full Costing, Competition and Regulatory Practice," Yale Law Journal, 82 (March 1973), pp. 639-655.

Behrman, Jack N., "Japanese Industrial Policy: A View from Outside," in Robert E. Driscoll and Jack N. Behrman, eds., National Industrial Policies. Cambridge, Mass.: Oelgeschlager, Gunn & Hain, 1984b, pp. 85-91.

Benston, George J., "Accounting Numbers and Economic Values," Antitrust Bulletin, 27 (Spring 1982), pp. 161-215.
Bianchi, Patrizio and Sandrine Labory, eds., International Handbook on Industrial Policy. Cheltenham: Edward Elgar, 2006.

Bowman, Ward S., Jr., "The Prerequisites and Effects of Resale Price maintenance," University of Chicago Law Review, 22 (Summer 1955), pp. 825-873.

Bowman, Ward S., Jr., "Tying Arrangements and the Leverage Problem," Yale Law Journal, (November 1957), pp. 19-36.

Bowman, Ward S., Jr., Patent and Antitrust Law: A Legal and Economic Appraisal. Chicago: University of Chicago Press, 1973.

Brock, Gerald W., "Dominant Firm Response to Competitive Challenge: Peripheral Manufacturers' Suits against IBM (1979-1983)," in John E. Kwoka, Jr., and Lawrence J. White, eds., The Antitrust Revolution, New York: HarperCollins, 1989, pp. 160-182.

Brodley, Joseph F., Patrick Bolton, and Michael H. Riordon, "Predatory Pricing: Strategic Theory and Legal Policy," Georgetown Law Journal, 88 (August 2000), pp. 2239-2330.

Brodley, Joseph F. and George A. Hay, "Predatory Pricing: Competing Economic Theories and the Evolution of Legal Standards," Cornell Law Review, 66 (April 1981), pp. 738-803.

Buccirossi, Paolo, ed., Handbook of Antitrust. Cambridge, Mass.: MIT Press, 2007.

Burnett, William B., "Predation by a Nondominant Firm: The Liggett Case (1993)," in John E. Kwoka, Jr., and Lawrence J. White, eds., The Antitrust Revolution: Economics, Competition, and Policy, 3rd edn. New York: Oxford University Press, 1999, pp. 239-263.

Burstein, Meyer L., "The Economics of Tie-In Sales," Review of Economics and Statistics, 42 (February 1960a), pp. 68-73.

Burstein, Meyer L., "A Theory of Full-Line Forcing," Northwestern University Law Review, (March-April 1960b), pp. 62-95.

Cohen, Wesley M., "Empirical Studies of Innovative Activity," in Handbook of the Economics of Innovation and Technological Change, edited by Paul Stoneman. Cambridge, Mass.: Blackwell, 1995, pp. 182-264.

Cohen, Wesley M. and Richard C. Levin, "Empirical Studies of Innovation and Market Structure," in Handbook of Industrial Organization, Vol. 2, edited by Richard Schmalensee and Robert Willig. Amsterdam: North-Holland, 1989, pp. 1059-1107.
De Jong, Henry W. and William G. Shepherd, eds., Pioneers of Industrial Organization: How the Economics of Competition and Monopoly Took Shape. Cheltenham: Edward Elgar, 2007.

DeLamarter, Richard T., Big Blue: IBM's Use and Abuse of Power. New York: Dodd, Mead, 1986.

Driscoll, Robert E. and Jack N. Behrman, "Introduction," in Robert E. Driscoll and Jack N. Behrman, eds., National Industrial Policies. Cambridge, Mass.: Oelgeschlager, Gunn & Hain, 1984, pp. 1-24.

Edlin, Aaron S. and Joseph Farrell, "The American Airlines Case: A Chance to Clarify Predation Policy (2001)," in John E. Kwoka, Jr., and Lawrence J. White, eds., The Antitrust Revolution, 4th edn. New York: Oxford University Press, 2004, pp. 502-527.

Elzinga, Kenneth G., "Collusive Predation: Matsushita v. Zenith (1986)," in John E. Kwoka, Jr., and Lawrence J. White, eds., The Antitrust Revolution: Economics, Competition, and Policy, 3rd edn. New York: Oxford University Press, 1999, pp. 220-238.

Evans, David S., ed., Breaking up Bell: Essays on Industrial Organization and Regulation. New York: North Holland, 1983.

Federal Trade Commission, "FTC History: Bureau of Economics Contributions to Law Enforcement, Research, and Economic Knowledge and Policy," Roundtable with Former Directors of the Bureau of Economics, Federal Trade Commission, September 4, 2003; available at: http://www.ftc.gov/be/workshops/directorsconference/docs/directorstableGOOD.pdf

Fisher, Franklin M., "On the Mis-Use of the Profits-Sales Ratio to Infer Monopoly Power," RAND Journal of Economics, 18 (Autumn 1987), pp. 384-396.

Fisher, Franklin M. and John J. McGowan, "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, 73 (March 1983), pp. 82-97.

Fisher, Franklin M., John J. McGowan, and Joen E. Greenwood, Folded, Spindled, and Mutilated: Economic Analysis and U.S. v. IBM. Cambridge, Mass.: MIT Press, 1983.

Green, Mark J., The Closed Enterprise System. New York: Grossman, 1972.

Harrington, Joseph E., Jr., "Corporate Leniency Programs and the Role of the Antitrust Authority in Detecting Collusion," working paper, Johns Hopkins University, February 2006; accessible at: http://www.econ.jhu.edu/People/Harrington/Tokyo.pdf

Houthakker, Hendrik S., "Expert Testimony by Economists: What Makes It Effective?" in Daniel J. Slottje, ed., The Role of the Academic Economist in Litigation Support. Amsterdam: Elsevier, 1999, pp. 1-10.
Hovenkamp, Herbert, Antitrust. St. Paul, Minn.: West Group, 1999a.

Hovenkamp, Herbert, Federal Antitrust Policy: The Law of Competition and its Practice. St. Paul, Minn.: West Group, 1999b.

Hovenkamp, Herbert, The Antitrust Enterprise: Principle and Execution. Cambridge, Mass.: Harvard University Press, 2005.

Johnson, Chalmers, MITI and the Japanese Miracle. Stanford, Calif.: Stanford University Press, 1982.

Johnson, Chalmers, ed., The Industrial Policy Debate. San Francisco: Institute for Contemporary Studies, 1984.

Joskow, Paul L. and Alvin K. Klevorick, "A Framework for Analyzing Predatory Pricing Policy," Yale Law Journal, 89 (December 1979), pp. 213-270.

Joskow, Paul L. and Roger G. Noll, "Economic Regulation: Deregulation and Regulatory Reform during the 1980s," in Martin Feldstein, ed., American Economic Policy in the 1980s. Chicago: University of Chicago Press, 1994, pp. 367-440.

Joskow, Paul L. and Nancy L. Rose, "The Effects of Economic Regulation," in Richard Schmalensee and Robert D. Willig, eds., Handbook of Industrial Organization, vol. 2. Amsterdam: North Holland, 1989, pp. 1449-1506.

Kaysen, Carl, United States v. United Shoe Machinery Corporation: An Economic Analysis of an Anti-Trust Case. Cambridge, Mass.: Harvard University Press, 1956.

Kaysen, Carl and Donald F. Turner, Antitrust Policy: An Economic and Legal Analysis. Cambridge, Mass.: Harvard University Press, 1959.

Kwoka, John E., Jr., and Lawrence J. White, eds., The Antitrust Revolution. Glenview, Ill.: Scott, Foresman, 1989.

Kwoka, John E., Jr., and Lawrence J. White, eds., The Antitrust Revolution: The Role of Economics, 2nd edn. New York: HarperCollins, 1994

Kwoka, John E., Jr., and Lawrence J. White, eds., The Antitrust Revolution: Economics, Competition, and Policy, 3rd edn. New York: Oxford University Press, 1999.

Kwoka, John E., Jr., and Lawrence J. White, eds., The Antitrust Revolution: Economics, Competition, and Policy, 4th edn. New York: Oxford University Press, 2004.

Kwoka, John E., Jr., and Lawrence J. White, eds., The Antitrust Revolution: Economics, Competition,