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1 - Economics

Published online by Cambridge University Press:  12 November 2009

Keith N. Hylton
Affiliation:
Boston University
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Summary

In this chapter, I will introduce economic concepts that I plan to use throughout the text, set out the basic economics of monopoly, and compare monopoly with its polar opposite, perfect competition. I also will discuss some relatively new topics, such as transaction-cost and information economics, and their relevance to antitrust policy.

DEFINITIONS

Monopoly

A monopolist is a single supplier of a good. However, this definition is too simple, because it includes firms that become dominant by being the lowest-cost competitor and those that obtain an exclusive franchise from the state. As far as antitrust policy is concerned, there is a big difference between these two cases. Because the simple, “single-supplier” definition is potentially misleading, one should focus on market conditions. The crucial feature of monopoly status is the absence of competition from other firms.

The common example of monopoly in our lives is local telephone service, provided in most places in the United States by a regulated, privately owned monopoly. However, even here competition from wireless and optical fiber companies has eroded the monopoly status of the local telephone companies. One of the purest monopolies in recent memory was Aeroflot, the airline of the former Soviet Union. Before the breakup of the Soviet Union, there were no competing airlines.

Market Price

A market equilibrium, where the quantity demanded by consumers equals the quantity supplied by producers, generates a market price, as shown in Figure 1.1.

Type
Chapter
Information
Antitrust Law
Economic Theory and Common Law Evolution
, pp. 1 - 26
Publisher: Cambridge University Press
Print publication year: 2003

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  • Economics
  • Keith N. Hylton, Boston University
  • Book: Antitrust Law
  • Online publication: 12 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610158.002
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  • Economics
  • Keith N. Hylton, Boston University
  • Book: Antitrust Law
  • Online publication: 12 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610158.002
Available formats
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Send book to Google Drive

To send content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about sending content to Google Drive.

  • Economics
  • Keith N. Hylton, Boston University
  • Book: Antitrust Law
  • Online publication: 12 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610158.002
Available formats
×