Pushing the Envelope: Antitrust Implications of the Envelope Theorem, 17 Mississippi College Law Review 21 (1996)
Aaron Director and Edward Levi discuss the difficult problems of regulating monopoly firms that "acquired their size without combination." In their thoughtful discussion of Alcoa, Director and Levi follow the convolutions of Judge Learned Hand's opinion in which Alcoa is ultimately culpable for anticipating the increases in the demand for ingot by "doubling and redoubling its capacity." Commentators and courts have long struggled to distinguish impermissible from benign acquisition of monopoly power.
In these remarks, I would like to argue that our antitrust law has paid too much attention to how monopolists acquired their monopoly power and not enough attention to whether a monopolist has exploited its monopoly power by raising prices. While monopoly power might be thrust upon a firm, supra-competitive pricing is not. My thesis is that liability for monopolization should turn more on evidence about the degree of the monopoly overcharge. In particular, we should structure our antitrust laws to deter monopolists from charging the full monopoly price.
This thesis is a fairly straightforward implication of the "envelope" theorem. The first section will describe the "envelope" theorem, and the second section will then develop its implications for antitrust law.
Date of Authorship for this Version
Ayres, Ian, "Pushing the Envelope: Antitrust Implications of the Envelope Theorem" (1996). Faculty Scholarship Series. 1501.