ANTITRUST and REGULATION

3d Module, 2002/2003

Professor: Russell Pittman

This course in applied microeconomics discusses the two principal public policies used around the world for dealing with the exercise of monopoly power in particular markets: antitrust (also known as antimonopoly or competition policy) and regulation. Current economic thinking, both normative and positive, is placed in the context of practical problems and issues, with a focus on the experience in the US, the European Union, and Russia. In the antitrust area, separate attention is given to problems of cartels, abuse of a dominant position, and mergers, while in the regulation area, separate attention is given to different methods of regulation (especially rate-of-return regulation vs. incentive regulation) and to issues regarding deregulation, privatization, and restructuring. One paper is required. Grading is 40% paper, 40% final exam, 20% class participation.

Primary sources:

• David Kaserman and John Mayo, Government amd Business: The Economics of Antitrust and Regulation (Dryden, 1995) (KM)
• John Kwoka and Lawrence White, eds., The Antitrust Revolution: Economics, Competition, and Policy, 3rd ed. (Oxford, 1999) (KW)
• David Newbery, Privatization, Restructuring, and Regulation of Network Utilities (MIT, 2000) (N)
• Jean-Jacques Laffont and Jean Tirole, Competition in Telecommunications (MIT, 2000) (LT)

1. Antitrust: History, Philosophy, Institutions

 KM, chapter 3

 KW, introduction to part 1

2. Horizontal Agreements: Explicit and Tacit

 KM, chapters 5-6

 KW, chapters 7, 13

3. Vertical Agreements and Restraints: Procompetitive Theories

 KM, chapters 9-10

 KW, chapters 14, 16

4. Vertical Agreements and Restraints: Abuse of Dominance

 KW, chapter 17

5. Abuse of Dominance: Other Forms

 KM, chapter 4

 KW, chapters 9, 10, 15

6. Merger Control

 KM, chapter 7

 KW, chapter 6

7. Regulation: History, Philosophy, Institutions

 KM, chapters 12-13

 N, chapters 1-4

Levy and Spiller, *Regulation, Institutions, and Commitment in Telecommunications: A Comparative Analysis of Five Country Studies (World Bank, 1994)

8. Liberalization and Restructuring

 N, chapter 5

Pittman, *Vertical Restructuring (or Not) of the Infrastructure Sectors of Transition Economies,* background paper, World Development Report 2002: Building Institutions for Markets (World Bank, 2001)

9. Railroads

 KW, chapter 3

Pittman, *Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal,* Journal of Industrial Economics (1990)

Pittman, *Options for Creating Competition in the Rail Sector,* Competition and Markets (St. Petersburg), fall 2001

10. Electricity

 N, chapter 6

 KW, chapter 4

 Joskow, *California*s Electricity Crisis,* Oxford Review of Economic Policy (2002)

11. Telecommunications

 N, chapter 7

 LT

 KW, chapter 5

Brennan, *Why Regulated Firms Should Be Kept Out of Unregulated Markets: Understanding the Divestiture in United States v. AT&T,* Antitrust Bulletin (1987).