The Effects of the Interstate Commerce Act on Transport Costs: Evidence from Wheat Prices

There is significant debate over the effect of the Interstate Commerce Act (ICA) on the cost of rail transport to shippers. Taking price differences across locations as proxy for transport costs, we use data on wheat prices before and after the implementation of the ICA to see if the Act led to smaller differences in wheat prices across American cities relative to a control group of European cities. We find that the ICA had no effect on US transport costs; however, it reduced their volatility substantially. This evidence supports the view that the ICA helped stabilize cartel prices after a period of significant price wars.     

Railroads and Price Discrimination: The Roles of Competition, Information, and Regulation

I evaluate railroad price discrimination in three periods: 1870–1886, before the passage of the Interstate Commerce Act; 1945–1975, when rates were regulated but railroads faced extensive intermodal competition; and 1980–2010, after the passage of major regulatory reforms. While price discrimination was widespread in each period, the specific practices varied as the nature of competition, regulation, and the information available to decision-makers changed. The Act focused heavily on price discrimination, and limited some practices while encouraging others. One major weakness of the Act was the restrictions that were imposed on pricing practices that could lead to cost reductions and productivity improvements.     

Horizontal Concentration and Vertical Integration in the Cable Television Industry

In the recent past, the cable industry has exhibited a pronounced tendency toward increased vertical integration and concentration of cable system ownership. As a result, the 1992 Cable Act proposed and the Federal Communications Commission implemented restrictions on such activity. Two antitrust concerns include the size of programming discounts offered to large multiple-system operators and price and carriage discrimination by vertically integrated programming networks. The empirical model in this paper attempts to systematically measure the effect of ownership concentration and vertical integration on the programming cost and price of cable operators. We find that concentration and integration lower the programming cost to cable systems affiliated with larger multiple-system operators. These discounts are partially passed along to consumers in the form of lower prices.     

The Obfuscation of the Common Good

The remarkable, albeit fictional, exchange between a deceased senator and a philosophy professor raises a number of interesting issues about the Sherman Act.In the pages that follow, I offer some criticisms of the dialogue. 1 I will show that the professor's positions misuse Rawlsian theory to advocate casting unnecessary burdens on society in general and the poor in particular. The professor is especially dispirited about the way the Sherman Act has been interpreted over the years. In the dialogue, the professor seems to want a populist element to be interjected into judicial constructions of that legislation. By the time the dialogue is over, both men have expressed a belief that government should become more involved in economic decision-making. Yet both men also apparently recognize that human institutions may be incapable of administering a vast and complex society in a satisfactory way.     

Antitrust,the Rule of Reason,and Democracy

Professor Barnes responds to William Curran's fictional dialogue between Senator John Sherman and philosopher John Rawls, with a fictional letter from Supreme Court Justice William O. Douglas. Professor Barnes discusses the importance of the anarcho-socialist movement of the late nineteenth century to the adoption of the Sherman Act, the historical and logical inevitability of adoption of a rule of reason in antitrust law, the relevance of efficiency to the rule of reason, and the relationship between competition and the promotion of democratic ideals.     

Vertical restraints in the Australian Trade Practices Act

Vertical restraints are singled out for detailed legislative treatment in the AustralianTrade Practices Act. Resale price maintenance and third-line forcing (tying another firm's products) are illegal per se while price discrimination and non-price vertical restraints (apart from third-line forcing) are subject to a competition test. Most vertical restraints may be either authorised by the Trade Practices Commission or given statutory exemption from the Act under a notification procedure unique to vertical restraints. The ability to seek an authorisation or to notify the Commission about a vertical practice has meant that the economic issues in this area have been dealt with mainly in administrative processes outside the courts. While issues of economic efficiency have been important, the main objective of the Commission has been to benefit consumers by promoting competition as a process. This paper briefly overviews what is probably the most complex area of antitrust in Australia yet, which has received negligible academic comment.     

The treatment of market dominance

This paper first reviews the conceptual basis for Sherman Act treatments of market dominance. Chicago-UCLA objections to treatment are found to be weak and unproven. Then the results of leading past cases and of possible future candidates are discussed. A revival of Section 2 is needed, with extensive study of candidates, even if few firms are actually taken to legal action.     

Exports and antitrust: Complements or substitutes?

Conflicting arguments have recently been voiced concerning the impact of antitrust statutes on the export performance of U.S. industries. On the one hand, opponents of vigorous enforcement have argued that antitrust constraints prevent firms from achieving efficiencies, thereby hampering competitiveness on world markets. On the other hand, proponents of antitrust have argued that vigorous enforcement tempers monopolistic pricing, thereby improving export performance. This paper presents an empirical test of these competing arguments. Our results indicate that Sherman Act Section 1 (price-fixing) enforcement has a positive effect on export shares, while Clayton Act Section 7 (merger) enforcement appears to have a negative effect.     

Multi-dimensional price discrimination

We examine the profitability and welfare implications of price discrimination in a multi-dimensional model. First, when firms price discriminate on one and the same dimension, uniform price lies in between discriminatory prices and price discrimination raises profits relative to uniform pricing. This is in contrast to common findings in existing one-dimensional models featuring best-response asymmetry, suggesting that price discrimination can have qualitatively different implications in one- and multi-dimensional models. Second, price discrimination on one and the same dimension is the likely outcome when price discrimination decisions are endogenized using a two-stage discrimination-then-pricing game. Correspondingly, an observation of one-dimensional price discrimination in practice does not necessarily indicate that the underlying model should be one-dimensional.     

Third-degree price discrimination in oligopoly with endogenous input costs

This paper examines the output effect of third-degree price discrimination in symmetrically differentiated oligopoly. We find that when the sellers’ input costs are chosen endogenously by an upstream supplier with market power, as opposed to being fixed exogenously, long-standing qualitative conclusions about the effect of price discrimination on aggregate output can be reversed. In contrast to previous findings (e.g., by Holmes, 1989), more intense competition in the strong market than in the weak market can make it less likely that price discrimination raises aggregate output. For linear demand functions, we establish necessary and sufficient conditions under which the output effect changes sign when input costs are endogenized.     

Direct Welfare Analysis of Relative Price Regulation*

The paper synthesizes and develops the welfare analysis of regulating relative prices, for example price differences, of which banning price discrimination is a special case. Welfare results are derived directly by convexity arguments using functions of welfare levels. The method is also used to obtain results about effects on consumer surplus.     

CUSTOMER POACHING AND ADVERTISING*

This paper is a first look at the dynamic effects of customer poaching in homogeneous product markets, where firms need to invest in advertising to generate awareness. When a firm is able to recognize customers with different purchasing histories, it may send them targeted advertisements with different prices. It is shown that only the firm which advertises the highest price in the first period will engage in price discrimination, a practice that clearly benefits the discriminating firm. This poaching gives rise to ‘the race for discrimination effect,’ through which price discrimination may act actually to soften price competition rather than intensify it. As a result, all firms may become better off, even when only one of them can engage in price discrimination. This paper offers a first attempt to evaluate the effects of price discrimination on the efficiency properties of advertising. In markets with low or no advertising costs, allowing firms to price discriminate leads them to provide too little advertising, which is not good for consumers and overall welfare. Only in markets with high advertising costs, might firms overadvertise. Regarding the welfare effects, price discrimination is generally bad for welfare and consumer surplus, though good for firms.     

Third‐Degree Price Discrimination and Consumer Surplus

This paper considers the effects of monopoly third‐degree price discrimination on aggregate consumer surplus. Discrimination is likely to reduce surplus (relative to that obtained with a uniform price), but surplus can rise under reasonable conditions. If the ratio of the pass‐through coefficient to the price elasticity at the uniform price is higher in the market with the higher price elasticity then surplus is larger with discrimination (for a large set of demand functions). The relatively high pass‐through coefficient implies a large price reduction in this market. With logit demand functions surplus is higher with discrimination if pass‐through is above 0.5.     

INPUT PRICE DISCRIMINATION WHEN BUYERS OPERATE IN MULTIPLE MARKETS*

This paper revisits third‐degree price discrimination when input buyers serve multiple product markets. Such circumstances are prevalent since buyers often use the same input to produce different outputs, and even homogenous outputs are routinely sold through different locations. The typical view is that price discrimination stifles efficiency (and welfare) by resulting in price concessions to less efficient firms. When buyers serve multiple markets, price discrimination leads to price breaks for firms in markets with lower demand. When lower demand markets also have less competition, price discrimination can provide welfare gains by shifting output to less competitive markets.     

Third-Degree Price Discrimination With Interdependent Demands

This paper analyzes the price, output, and welfare effects of third-degree price discrimination for a monopolist who sells in two interdependent markets. The case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes. The economic effects of price discrimination are shown to depend on the type and strength of demand interdependence, the curvature of the demands and the slope of marginal cost. The circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed.     

Multiproduct Firms' Pricing Behaviour in the Italian Grocery Trade

This paper investigates the determinants of price dispersion between different goods in grocery retailing, as the result of pricing decisions of multiproduct retailers. Demand parameters are generated using the LES system. These are then used to test theoretical predictions about the nature of supermarkets' pricing and consumers' shopping behaviour using disaggregated data from the Italian grocery trade. The empirical results concerning the supply function provide evidence for the existence, in all types of retail organisation, of a monopolistic form of price discrimination. The results are consistent with discrimination due to the exploitation of customers' switching costs.     

PRICE DISCRIMINATION IN STACKELBERG COMPETITION*

We examine the effects of price discrimination in the Stackelberg competition model for the linear demand case. We show that the leader does not use any price discrimination at all. Rather, the follower does all price discrimination. The leader directs all of its first mover preemptive advantage to attract the highest value consumers who pay a uniformly high price. We observe that profits and total welfare are larger and consumer surplus is smaller than those of the standard Stackelberg competition model.     

Is Airline Price Dispersion the Result of Careful Planning or Competitive Forces?

We develop a model of price dispersion to distinguish the impact of price discrimination from that of peak load pricing schemes or atypical competition resulting from the financial difficulties of the early 1990s. By utilizing three alternative measures of dispersion and appealing to economic theory for our specification, we find robust results suggesting an estrangement between price dispersion and price discrimination. While some discrimination continues to persist at monopolized endpoints, most dispersion is associated with fare wars and peak load pricing schemes.     

The Legacy of the Interstate Commerce Act and Labor: Legislation, Unionization, and Labor Earnings in Surface Transportation Services

The intended purpose of the 1887 Interstate Commerce Act (ICA) was the establishment of the Interstate Commerce Commission (ICC) as a regulatory agency that initially provided oversight of rate and entry of interstate commerce in the rail industry. The ICC’s jurisdiction later included regulation of trucking and bus transportation. An unintended consequence of ICC regulation was the development of labor markets in these sectors that helped promote labor organization and labor rent sharing. Indeed, some of the most influential unions in American labor history represented workers in ICC-regulated industries. This study examines the ICA and its aftermath as it applies to labor in these industries.     

美国拟征收碳关税中国当如何应对

美国众议院2009年6月底通过了《美国清洁能源安全法案》。法案允许美国对来自没有采取与美国相当的温室气体减排措施国家的高能耗、初级进口产品征收碳关税。尽管相应的法案还有待美国参议院通过,但中国应未雨绸缪,采取适当策略加以应对。中国应适时向世界预示何时对其温室气体排放总量进行控制,消除美国通过实施碳关税指责中国的把柄;应综合考量确定排放总量,承诺控制排放应循序渐进,由易而难,留有过渡期和相对应的承诺;应充分利用气候变化国际框架公约搭建的平台,有效应对碳关税。