Apple and Amazon's Antitrust Antics
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Microeconomics Exam Review Chapters 8 Through 12, 16, 17 and 19
MICROECONOMICS EXAM REVIEW CHAPTERS 8 THROUGH 12, 16, 17 AND 19 Key Terms and Concepts to Know CHAPTER 8 - PERFECT COMPETITION I. An Introduction to Perfect Competition A. Perfectly Competitive Market Structure: • Has many buyers and sellers. • Sells a commodity or standardized product. • Has buyers and sellers who are fully informed. • Has firms and resources that are freely mobile. • Perfectly competitive firm is a price taker; one firm has no control over price. B. Demand Under Perfect Competition: Horizontal line at the market price II. Short-Run Profit Maximization A. Total Revenue Minus Total Cost: The firm maximizes economic profit by finding the quantity at which total revenue exceeds total cost by the greatest amount. B. Marginal Revenue Equals Marginal Cost in Equilibrium • Marginal Revenue: The change in total revenue from selling another unit of output: • MR = ΔTR/Δq • In perfect competition, marginal revenue equals market price. • Market price = Marginal revenue = Average revenue • The firm increases output as long as marginal revenue exceeds marginal cost. • Golden rule of profit maximization. The firm maximizes profit by producing where marginal cost equals marginal revenue. C. Economic Profit in Short-Run: Because the marginal revenue curve is horizontal at the market price, it is also the firm’s demand curve. The firm can sell any quantity at this price. III. Minimizing Short-Run Losses The short run is defined as a period too short to allow existing firms to leave the industry. The following is a summary of short-run behavior: A. Fixed Costs and Minimizing Losses: If a firm shuts down, it must still pay fixed costs. -
1 Bertrand Model
ECON 312: Oligopolisitic Competition 1 Industrial Organization Oligopolistic Competition Both the monopoly and the perfectly competitive market structure has in common is that neither has to concern itself with the strategic choices of its competition. In the former, this is trivially true since there isn't any competition. While the latter is so insignificant that the single firm has no effect. In an oligopoly where there is more than one firm, and yet because the number of firms are small, they each have to consider what the other does. Consider the product launch decision, and pricing decision of Apple in relation to the IPOD models. If the features of the models it has in the line up is similar to Creative Technology's, it would have to be concerned with the pricing decision, and the timing of its announcement in relation to that of the other firm. We will now begin the exposition of Oligopolistic Competition. 1 Bertrand Model Firms can compete on several variables, and levels, for example, they can compete based on their choices of prices, quantity, and quality. The most basic and funda- mental competition pertains to pricing choices. The Bertrand Model is examines the interdependence between rivals' decisions in terms of pricing decisions. The assumptions of the model are: 1. 2 firms in the market, i 2 f1; 2g. 2. Goods produced are homogenous, ) products are perfect substitutes. 3. Firms set prices simultaneously. 4. Each firm has the same constant marginal cost of c. What is the equilibrium, or best strategy of each firm? The answer is that both firms will set the same prices, p1 = p2 = p, and that it will be equal to the marginal ECON 312: Oligopolisitic Competition 2 cost, in other words, the perfectly competitive outcome. -
Amazon's Antitrust Paradox
LINA M. KHAN Amazon’s Antitrust Paradox abstract. Amazon is the titan of twenty-first century commerce. In addition to being a re- tailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and ex- pand widely instead. Through this strategy, the company has positioned itself at the center of e- commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny. This Note argues that the current framework in antitrust—specifically its pegging competi- tion to “consumer welfare,” defined as short-term price effects—is unequipped to capture the ar- chitecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are height- ened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have re- warded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. -
David W. Sussman, Are Our Pastimes Past Their Time?
SUSSMAN MACRO DRAFT (DO NOT DELETE) 4/4/2017 2:24 PM ARE OUR PASTIMES PAST THEIR TIME? HOW WILL THE MEDIA INDUSTRY DISRUPTION AND CHANGES TO THE LEGAL ENVIRONMENT AFFECT THE SPORTS INDUSTRY? David W. Sussman† CONTENTS INTRODUCTION ............................................................................. 450 I. THE INCREASED REVENUES AND ASSET VALUES OF SPORTS TEAMS HAVE BEEN DRIVEN LARGELY BY INCREASES IN THE RIGHTS FEES PAID BY MEDIA COMPANIES ......................... 453 II. DISRUPTIONS TO THE ECOSYSTEM OF THE ENTERTAINMENT INDUSTRY ........................................................................... 463 A. Technological Disruptions to the Entertainment Industry Ecosystem ................................................................... 468 1. Audience Fragmentation....................................... 468 2. Disintermediation ................................................. 470 3. Shifting Viewership Choices ................................. 471 4. Ad-Skipping ........................................................... 473 5. Time-Shifting ......................................................... 475 6. Copying of Content ............................................... 478 7. Non-Linear Viewing (VOD) .................................. 479 B. Digital Distribution of Content: The Competitive Alternative to Traditional Platforms .......................... 480 1. OTT Distribution Services .................................... 482 2. Other Emerging Technologies .............................. 483 3. Cord Cutting/Cord Shaving -
The Marginal Cost Controversy in Intellectual Property John F Duffyt
The Marginal Cost Controversy in Intellectual Property John F Duffyt In 1938, Harold Hotelling formally advanced the position that "the optimum of the general welfare corresponds to the sale of everything at marginal cost."' To reach this optimum, Hotelling argued, general gov- ernment revenues should "be applied to cover the fixed costs of electric power plants, waterworks, railroad, and other industries in which the fixed costs are large, so as to reduce to the level of marginal cost the prices charged for the services and products of these industries."2 Other major economists of the day subsequently endorsed Hotelling's view' and, in the late 1930s and early 1940s, it "aroused considerable interest and [had] al- ready found its way into some textbooks on public utility economics."' In his 1946 article, The MarginalCost Controversy,Ronald Coase set forth a detailed rejoinder to the Hotelling thesis, concluding that the social subsidies proposed by Hotelling "would bring about a maldistribu- tion of the factors of production, a maldistribution of income and proba- bly a loss similar to that which the scheme was designed to avoid."' The article, which Richard Posner would later hail as Coase's "most impor- tant" contribution to the field of public utility pricing,6 was part of a wave of literature debating the merits of the Hotelling proposal.' Yet the very success of the critique by Coase and others has led to the entire contro- t Professor of Law, George Washington University Law School. The author thanks Michael Abramowicz. Richard Hynes, Eric Kades. Doug Lichtman, Chip Lupu, Alan Meese, Richard Pierce, Anne Sprightley Ryan, and Joshua Schwartz for comments on earlier drafts. -
N Ieman Reports
NIEMAN REPORTS Nieman Reports One Francis Avenue Cambridge, Massachusetts 02138 Nieman Reports THE NIEMAN FOUNDATION FOR JOURNALISM AT HARVARD UNIVERSITY VOL. 62 NO. 1 SPRING 2008 VOL. 62 NO. 1 SPRING 2008 21 ST CENTURY MUCKRAKERS THE NIEMAN FOUNDATION HARVARDAT UNIVERSITY 21st Century Muckrakers Who Are They? How Do They Do Their Work? Words & Reflections: Secrets, Sources and Silencing Watchdogs Journalism 2.0 End Note went to the Carnegie Endowment in New York but of the Oakland Tribune, and Maynard was throw- found times to return to Cambridge—like many, ing out questions fast and furiously about my civil I had “withdrawal symptoms” after my Harvard rights coverage. I realized my interview was lasting ‘to promote and elevate the year—and would meet with Tenney. She came to longer than most, and I wondered, “Is he trying to my wedding in Toronto in 1984, and we tried to knock me out of competition?” Then I happened to keep in touch regularly. Several of our class, Peggy glance over at Tenney and got the only smile from standards of journalism’ Simpson, Peggy Engel, Kat Harting, and Nancy the group—and a warm, welcoming one it was. I Day visited Tenney in her assisted living facility felt calmer. Finally, when the interview ended, I in Cambridge some years ago, during a Nieman am happy to say, Maynard leaped out of his chair reunion. She cared little about her own problems and hugged me. Agnes Wahl Nieman and was always interested in others. Curator Jim Tenney was a unique woman, and I thoroughly Thomson was the public and intellectual face of enjoyed her friendship. -
Imperfect Competition: Monopoly
Imperfect Competition: Monopoly New Topic: Monopoly Q: What is a monopoly? A monopoly is a firm that faces a downward sloping demand, and has a choice about what price to charge – an increase in price doesn’t send most or all of the customers away to rivals. A Monopolistic Market consists of a single seller facing many buyers. Monopoly Q: What are examples of monopolies? There is one producer of aircraft carriers, but there few pure monopolies in the world - US postal mail faces competition from Fed-ex - Microsoft faces competition from Apple or Linux - Google faces competition from Yahoo and Bing - Facebook faces competition from Twitter, IG, Google+ But many firms have some market power- can increase prices above marginal costs for a long period of time, without driving away consumers. Monopoly’s problem 3 Example: A monopolist faces demand given by p(q) 12 q There are no variable costs and all fixed costs are sunk. How many units should the monopoly produce and what price should it charge? By increasing quantity from 2 units to 5 units, the monopolist reduces the price from $10 to $7. The revenue gained is area III, the revenue lost is area I. The slope of the demand curve determines the optimal quantity and price. Monopoly’s problem 4 The monopoly faces a downward sloping demand curve and chooses both prices and quantity to maximize profits. We let the monopoly choose quantity q and the demand determine the price p(q) because it is more convenient. TR(q) p(q) MR [ p(q)q] q p(q) q q q • The monopoly’s chooses q to maximize profit: max (q) TR(q) TC(q) p(q)q TC(q) q The FONC gives: Marginal revenue 5 TR(q) p(q) The marginal revenue MR(q) p(q) q q q p Key property: The marginal revenue is below the demand curve: MR(q) p(q) Example: demand is p(q) =12-q. -
3. Labor Demand 3A. Labor Demand Model 3B. Short-Run Labor Demand 3B. Short-Run (Cont.)
3. Labor Demand 3A. Labor Demand Model E151A: C.Cameron n What happens when wage changes? 1. Firms maximize profit (rev - cost). In short-run? Implies produce where marginal profit = zero. In long-run? Maintained assumption throughout course. n What happens if markets are not 2. Two homogeneous factors of competitive due to monopoly or production: labor and capital. monopsony? Q = f(K, L) (Relaxed later) n What is effect of payroll tax? a. Short-run (capital is fixed) b. Long-run (capital may vary) 3A. Model (cont.) 3A. Model (cont.) 3. Price of labor = hourly wage rate. 4. Firms are price-takers in input and output markets. Implies no fringe benefits and no distinction Then marginal cost equals price between increasing labor by increasing the and marginal revenue equals price. number of workers and increasing labor by having current workers work more. Relax to allow: Monopoly: Price-maker in output good market Relax this assumption in ch. 5. Monopsony: Price-maker in input good market 3B. Short-Run (cont.) 3B. Short-Run Labor Demand n Price-taker in labor market: n MRP = Marginal Revenue Product of L L Then always MEL = w = Increase in Revenue due to So hire until MRPL = w one unit increase in Labor So MRPL curve is labor demand curve. = MR x P (P is price) n Price-taker in output market n ME = Marginal Revenue Product of L L Then always MRPL = MPLxP = Increase in Expenses due to n So in competitive markets hire until one unit increase in Labor MPLxP = w or MPL= w/P n L L Profit-maximizer hires until MRPL = MEL n MPL slopes down Þ DL slopes down 1 MRPL IS LABOR DEMAND CURVE 3C. -
Views Expressed Are Those of the Cambridge Ma 02142
Cover_Sp2010 3/17/2010 11:30 AM Page 1 Dædalus coming up in Dædalus: the challenges of Bruce Western, Glenn Loury, Lawrence D. Bobo, Marie Gottschalk, Dædalus mass incarceration Jonathan Simon, Robert J. Sampson, Robert Weisberg, Joan Petersilia, Nicola Lacey, Candace Kruttschnitt, Loïc Wacquant, Mark Kleiman, Jeffrey Fagan, and others Journal of the American Academy of Arts & Sciences Spring 2010 the economy Robert M. Solow, Benjamin M. Friedman, Lucian A. Bebchuk, Luigi Zingales, Edward Glaeser, Charles Goodhart, Barry Eichengreen, of news Spring 2010: on the future Thomas Romer, Peter Temin, Jeremy Stein, Robert E. Hall, and others on the Loren Ghiglione Introduction 5 future Herbert J. Gans News & the news media in the digital age: the meaning of Gerald Early, Henry Louis Gates, Jr., Glenda R. Carpio, David A. of news implications for democracy 8 minority/majority Hollinger, Jeffrey B. Ferguson, Hua Hsu, Daniel Geary, Lawrence Kathleen Hall Jamieson Are there lessons for the future of news from Jackson, Farah Grif½n, Korina Jocson, Eric Sundquist, Waldo Martin, & Jeffrey A. Gottfried the 2008 presidential campaign? 18 Werner Sollors, James Alan McPherson, Robert O’Meally, Jeffrey B. Robert H. Giles New economic models for U.S. journalism 26 Perry, Clarence Walker, Wilson Jeremiah Moses, Tommie Shelby, and others Jill Abramson Sustaining quality journalism 39 Brant Houston The future of investigative journalism 45 Donald Kennedy The future of science news 57 race, inequality Lawrence D. Bobo, William Julius Wilson, Michael Klarman, Rogers Ethan Zuckerman International reporting in the age of & culture Smith, Douglas Massey, Jennifer Hochschild, Bruce Western, Martha participatory media 66 Biondi, Roland Fryer, Cathy Cohen, James Heckman, Taeku Lee, Pap Ndiaye, Marcyliena Morgan, Richard Nisbett, Jennifer Richeson, Mitchell Stephens The case for wisdom journalism–and for journalists surrendering the pursuit Daniel Sabbagh, Alford Young, Roger Waldinger, and others of news 76 Jane B. -
A Business Lawyer's Bibliography: Books Every Dealmaker Should Read
585 A Business Lawyer’s Bibliography: Books Every Dealmaker Should Read Robert C. Illig Introduction There exists today in America’s libraries and bookstores a superb if underappreciated resource for those interested in teaching or learning about business law. Academic historians and contemporary financial journalists have amassed a huge and varied collection of books that tell the story of how, why and for whom our modern business world operates. For those not currently on the front line of legal practice, these books offer a quick and meaningful way in. They help the reader obtain something not included in the typical three-year tour of the law school classroom—a sense of the context of our practice. Although the typical law school curriculum places an appropriately heavy emphasis on theory and doctrine, the importance of a solid grounding in context should not be underestimated. The best business lawyers provide not only legal analysis and deal execution. We offer wisdom and counsel. When we cast ourselves in the role of technocrats, as Ronald Gilson would have us do, we allow our advice to be defined downward and ultimately commoditized.1 Yet the best of us strive to be much more than legal engineers, and our advice much more than a mere commodity. When we master context, we rise to the level of counselors—purveyors of judgment, caution and insight. The question, then, for young attorneys or those who lack experience in a particular field is how best to attain the prudence and judgment that are the promise of our profession. For some, insight is gained through youthful immersion in a family business or other enterprise or experience. -
The Revenue Functions of a Monopoly
SOLUTIONS 3 Microeconomics ACTIVITY 3-10 The Revenue Functions of a Monopoly At the opposite end of the market spectrum from perfect competition is monopoly. A monopoly exists when only one firm sells the good or service. This means the monopolist faces the market demand curve since it has no competition from other firms. If the monopolist wants to sell more of its product, it will have to lower its price. As a result, the price (P) at which an extra unit of output (Q) is sold will be greater than the marginal revenue (MR) from that unit. Student Alert: P is greater than MR for a monopolist. 1. Table 3-10.1 has information about the demand and revenue functions of the Moonglow Monopoly Company. Complete the table. Assume the monopoly charges each buyer the same P (i.e., there is no price discrimination). Enter the MR values at the higher of the two Q levels. For example, since total revenue (TR) increases by $37.50 when the firm increases Q from two to three units, put “+$37.50” in the MR column for Q = 3. Table 3-10.1 The Moonglow Monopoly Company Average revenue Q P TR MR (AR) 0 $100.00 $0.00 – – 1 $87.50 $87.50 +$87.50 $87.50 2 $75.00 $150.00 +$62.50 $75.00 3 $62.50 $187.50 +$37.50 $62.50 4 $50.00 $200.00 +$12.50 $50.00 5 $37.50 $187.50 –$12.50 $37.50 6 $25.00 $150.00 –$37.50 $25.00 7 $12.50 $87.50 –$62.50 $12.50 8 $0.00 $0.00 –$87.50 $0.00 2. -
Legal Restrictions on Exploitation of the Patent Monopoly: an Economic Analysis
The Yale Law Journal Volume 76, No. 2, December 1966 Legal Restrictions on Exploitation of the Patent Monopoly: An Economic Analysis William F. Baxter* I. A Frame of Reference The patent laws confer on a patentee power to exclude all others from making, using or selling his invention.' In furtherance of a con- stitutionally recognized goal-"To promote the Progress of Science and the useful Arts"-Congress has thus adopted a constitutionally authorized means--"securing... to Inventors the exclusive Right to their respective . Discoveries."2 The constitutional clause is re- markable in several respects. Its recognition of the possibility that invention might require encouragement implies not only that techno- logical innovation is desirable but also that, but for legal subsidization, the quantity of innovation forthcoming would or might be less than optimum. This recognition, coming on the morn of an era during which the tendency of a free market to achieve optimality in all activ- ities was greatly and religiously overestimated, 3 prompts brief inquiry into the soundness of the supposition. Several considerations support the view that the market would yield less than optimum innovative activity.4 Invention consists primarily of knowledge; and he whose research, experimentation and insight has * Professor of Law, Stanford University. A.B. 1951, LLB. 1956, Stanford University. 1. 35 U.S.C. § 154 (1964). 2. US. CoNsr. art.I, § 8. 3. Cf. JAFFE, A m mTr LAw, CASES AND MATERus 3-8 (1954). 4. See, e.g., Arrow, Economic Welfare and the Allocation of Resources For Invention, in THE RATE AND DIRECTION or INVENTIVE Acrrvry: ECONOMIC AND SOCIAL FAcTOrtS 609 (1962); Machiup, An Economic Review of the Patent System, Study #15 of the Sub.