This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Journal: Microeconomics
  4. November 2021
  5. A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases

A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases

  • Wallace P. Mullin
  • Christopher M. Snyder
American Economic Journal: Microeconomics
vol. 13, no. 4, November 2021
(pp. 172-217)
Download Full Text PDF

Abstract

We propose a simple method, requiring only minimal data, for bounding demand elasticities in growing, homogeneous-product markets. Since growing demand curves cannot cross, shifts in market equilibrium over time can be used to "funnel" the demand curve into a narrow region, bounding its slope. Our featured application assesses the antitrust remedy in the 1952 DuPont decision, ordering incumbents to license patents for commercial plastics. We bound the demand elasticity significantly below 1 in many post-remedy years, inconsistent with monopoly, supporting the remedy's effectiveness. A second application investigates whether the 1911 dissolution of American Tobacco fostered competition in the cigarette market.

Citation

Mullin, Wallace P., and Christopher M. Snyder. 2021. "A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases." American Economic Journal: Microeconomics, 13 (4): 172-217. DOI: 10.1257/mic.20190012

Additional Materials

JEL Classification

  • K21 Antitrust Law
  • L24 Contracting Out; Joint Ventures; Technology Licensing
  • L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
  • L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
  • N41 Economic History: Government, War, Law, International Relations, and Regulation: U.S.; Canada: Pre-1913
  • N42 Economic History: Government, War, Law, International Relations, and Regulation: U.S.; Canada: 1913-
  • O34 Intellectual Property and Intellectual Capital
There are no comments for this article.
Login to Comment