Harvard, Chicago, and Transaction Cost Economics in Antitrust Analysis

Abstract

Since Oliver Williamson published Markets and Hierarchies, transaction cost economics (TCE) has claimed an important place in antitrust, avoiding the extremes of the structuralist school, which saw market structure as decisive, and the Chicago school, which found monopoly only infrequently and denied that a monopolist could leverage its power into related markets. Since the 1970s both the structuralist and Chicago positions have moved toward the center, partly as a result of TCE. Already in 1978 Areeda and Turner produced the first volumes of the Antitrust Law treatise, which completely repudiated the leverage theory and abandoned the structuralist and leveraging positions on vertical integration. TCE analysis of contractual restraints recognizes that an important threat to competition is double marginalization, which can occur when market power is held by separate firms with complementary outputs. Nevertheless, one comparative advantage of both structuralism and the Chicago school was their simplicity. TCE analysis is more specific to the situation, demanding close scrutiny when significant market power is either present or realistically threatened.