American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases
American Economic Journal: Microeconomics
vol. 13,
no. 4, November 2021
(pp. 172–217)
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.20190012Additional 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