The Microsoft antitrust case has focused attention on recent economic scholarship on what’s called imperfect game competition, which uses mathematical game theory to understand the strategies companies might pursue in markets that depart from the abstract notion of perfect competition.
In perfect competition, no buyer or seller can influence the price. But in the real world, economists are interested in more complex and realistic strategic choices that affect market outcomes.
Just because a contract is unusual or exclusive, doesn’t mean it hampers competition. For example, consider the 1971 antitrust case involving Chicken Delight, a franchise operation that required franchisees to buy all supplies from the parent company rather than paying a percentage of store revenue. It was an elegant solution to a basic problem: in a cash business it is easy to lie about sales. A federal appeals court ruled Chicken Delight engaged in an illegal so-called tie-in arrangement.
But legal scholars note the franchisees didn’t have to sign up in the first place. There was plenty of competition. And the result was bad antitrust policy.
Source: Virginia Postrel, Microsoft, Chicken Delight and competition for an imperfect world, New York Times, June 20, 2002
For text http://www.nytimes.com/2002/06/20/business/20SCEN.html
For more on Anti-Trust http://www.ncpa.org/iss/leg
FMF Policy Bulletin\25 June 2002
