Antitrust law, policy, and practice are the product of a long and fruitful interdisciplinary collaboration between law and economics. Our chapter addresses an important aspect of that collaboration: the use courts can and should make of two bodies of knowledge in empirical industrial organization economics, as that academic discipline has evolved over the last few decades. Our examples focus on the US experience, which we know best. But we are confident that the broad considerations we discuss apply to any competition policy regime.
The first body of economic knowledge we discuss involves methods of distinguishing among alternative explanations for market outcomes or firm conduct. This is termed the problem of ‘‘identification’’ in empirical economics.We show how courts can apply what economists have learned about identification to the problems of defining markets and determining whether market power has been exercised. We show that the same analytic issues arise regardless of whether the evidence on these concepts is quantitative or qualitative.
The second relevant body of economic knowledge derives from the empirical economics research literature, taken as a whole. That literature demonstrates that di¤erences among industries are important, making the industry the appropriate unit of analysis for addressing economic issues related to competition policy. A similar conclusion was reached long ago in antitrust law, when market definition became central to reasonableness analysis.
But, as we explain, the research literature goes further in a way that has not yet been fully appreciated in antitrust: it suggests generalizations across closely related industries that can be exploited to help evaluate evidence and resolve cases.
We conclude by considering ways of increasing the institutional capacity of the judicial system to make use of these two bodies of economic learning. These include a possible limited role for neutral economic experts in litigation, and a role for the antitrust enforcement agencies in identifying and codifying relevant generalizations about industries from the empirical economic literature to make that learning available to courts.