James Langenfeld

Hicks-Marshall Conditions and Defining Antitrust Markets for Intermediate Goods

Abstract Purpose To develop a framework for systematically defining the relevant market for intermediate goods that incorporates downstream market conditions. Methodology/approach We combine the well-established “Hicks-Marshall” conditions of derived demand for inputs with “critical loss/critical elasticity of demand” to yield insights into the definition of antitrust markets for intermediate goods and the competitive effects from a merger. Findings We show that examining “Hicks-Marshall” conditions can provide a more rigorous framework for analyzing relevant markets for intermediate goods. We also show that solely examining demand substitution possibilities for direct customers of an input can lead to an incorrect market definition. Research limitations/implications Our framework may be difficult to apply in circumstances when several different downstream products use the input being examined and each of those downstream products has a different elasticity of demand. Practical implications We illustrate how reasonable ranges for key parameters relating to the ability of firms to substitute to other inputs and to adjust to downstream market conditions will often be sufficient to define antitrust markets for intermediate goods in practice. Originality/value Previous antitrust analysis has not systematically analyzed the impact of downstream market conditions in assessing market definition for intermediate goods. The framework we develop will be useful to future researchers attempting to define relevant markets for intermediate goods and evaluating the competitive effects of a merger.

Daubert and Other Gatekeeping Challenges of Antitrust Economists

This paper examines the affect of Daubert v. Merrell Dow Pharms and related gatekeeping decisions on expert testimony since January 2000, focusing primarily on economic testimony in antitrust cases. An analysis of gatekeeping motions on economic testimony taken from two data sets that attempt to track these motions suggests that the courts’ gatekeeping may have created additional barriers to plaintiff antitrust cases, and so may discourage well-qualified economists from taking these cases. These data show that economists appear to be most frequently challenged when providing economic opinions on behalf of the plaintiff in antitrust cases, while defense experts are often unchallenged. Moreover, plaintiff exclusions are much higher than defense expert exclusions. These results suggest further research should be done to test the reliability of the data, determine the causes of the apparent imbalance, and see what actions -- if any -- should be taken to address any imbalance.