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Chapter 11: Problem 4

As a result of globalization and new information and communications technology, would you expect that the definitions of markets that antitrust authorities use will become broader or narrower?

Short Answer

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In conclusion, the definitions of markets used by antitrust authorities are expected to become broader as a result of globalization and new information and communications technology. Both factors increase competition, expand consumer choices, and eliminate geographic barriers, requiring authorities to adopt a more extensive market definition to effectively assess the competitive landscape and prevent monopolistic practices.

Step by step solution

01

Introduction to Antitrust Laws and Market Definition

Antitrust laws are regulations that promote fair competition and discourage monopolistic practices in the market. Market definition is an essential part of antitrust laws, as it helps to identify the relevant market where antitrust rules apply. A market can be defined based on geographic, product, or functional characteristics. The scope of market definition can significantly affect how the authorities examine potential antitrust violations and take appropriate action.
02

Globalization and Market Definition

Globalization is the process by which businesses and markets integrate on a worldwide scale, allowing for the interdependence of economies and thus, increased competition. The increased level of competition thanks to globalization can lead to a broader market definition. This is because firms can now compete in various parts of the world, making antitrust authorities look beyond local markets when defining the relevant market scope. Furthermore, globalization facilitates entry for international firms, increasing the competitive alternatives available to consumers and making it difficult for a single firm to exert monopoly power.
03

New Information and Communications Technology and Market Definition

New information and communications technology (ICT) refers to the advancements in technology that facilitate in the sharing and spreading of information. With the spread of ICT and the internet, businesses are now able to communicate and transact with consumers across the globe, significantly easing cross-border business operations. This means that the market is no longer confined to a particular geographic area. As a result, the definitions of markets used by antitrust authorities need to encompass these international interactions and take into account the broad range of options available to consumers.
04

Broader or Narrower Market Definitions

In conclusion, it is expected that the definitions of markets used by antitrust authorities will become broader as a result of globalization and new information and communications technology. This is because both factors increase the level of competition in the market, expand the range of consumer choices, and eliminate geographic barriers that were previously limiting the market scope. As a result, antitrust authorities will need to adopt a more extensive market definition to effectively assess the competitive landscape and prevent monopolistic practices.

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Most popular questions from this chapter

Some years ago, two intercity bus companies, Greyhound Lines, Inc. and Trailways Transportation System, wanted to merge. One possible definition of the market in this case was "the market for intercity bus service." Another possible definition was "the market for intercity transportation, including personal cars, car rentals, passenger trains, and commuter air flights." Which definition do you think the bus companies preferred, and why?

Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology required having a wire running to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT\&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.) What real world changes made the deregulation possible?

What is deregulation? Name some industries that have been deregulated in the United States.

What is a corporate merger? What is an acquisition?

What is exclusive dealing? How might it reduce competition and when might it be acceptable?
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