Showing papers by "Oliver E. Williamson published in 1979"

Transaction-Cost Economics: The Governance of Contractual Relations

Abstract: THE new institutional economics is preoccupied with the origins, incidence, and ramifications of transaction costs. Indeed, if transaction costs are negligible, the organization of economic activity is irrelevant, since any advantages one mode of organization appears to hold over another will simply be eliminated by costless contracting. But despite the growing realization that transaction costs are central to the study of economics,' skeptics remain. Stanley Fischer's complaint is typical: "Transaction costs have a well-deserved bad name as a theoretical device ... [partly] because there is a suspicion that almost anything can be rationalized by invoking suitably specified transaction costs."2 Put differently, there are too many degrees of freedom; the concept wants for definition.

Assessing Vertical Market Restrictions: Antitrust Ramifications of the Transaction Cost Approach

Abstract: Whether troublesome antitrust issues are posed when vertical restraints are placed on distributors by manufacturers has long been disputed. Although economic analysis is needed to assess the ramifications of such restraints, this analysis comes in a variety of forms and does not speak with one voice to these issues. Defective economic reasoning predictably leads to results that are inimical to economic efficiency and sound public policy. Such was the case when franchise restrictions were held anticompetitive in United States v. Arnold, Schwinn & Co.' This Article develops the argument that failure to make express allowances for transaction cost considerations is responsible for mistaken public policy in this area. The transaction cost approach applies symmetrically both to an assessment of the efficiency gains, if any, arising from vertical restraints and to an evaluation of the strategic purposes and effects, if any, that accompany such restraints. After developing the justifications for, and occasional anticompetitive effects of, vertical market restrictions, I will suggest guidelines for federal antitrust policy. Part I outlines the general transaction cost approach and concludes that antitrust enforcement agencies and the courts should assume that vertical market restrictions are efficiency-enhancing unless certain structural conditions exist within the industry. Part II discusses strategic behavior and the structural characteristics of industries needed to support strategic outcomes. Vertical restraints pose troublesome antitrust issues only when these

Williamson on Predatory Pricing II

Abstract: This commentary addresses issues raised by Professors Areeda and Turner in Williamson on Predatory Pricing, which was published in the June 1978 issue of this Journal. 1 Areeda and Turner took exception with my earlier treatment of predatory pricing,2 in which I emphasized its strategic aspects.a They defended their previous treatment, 4 in which strategic aspects are ignored or suppressed. Although modeling strategic problems in nonstrategic terms can be illuminating, in that it sometimes helps to place strategic features in perspective, I contend that public policy with respect to strategic behavior ought to be informed by strategic analysis. Areeda and Turner evidently hold otherwise. Inasmuch as this commentary mainly deals with differences between myself and Areeda and Turner, I should like to emphasize at the outset that we agree on the following: (1) predatory pricing is not an empty concern; (2) a major hazard in allowing private predatory pricing actions to be brought is that they will be used for protectionist purposes; and (3) a principal means of safeguarding against protectionist abuses of the law is to devise predatory pricing rules that have good economic efficiency properties. But although protectionist abuses of predatory pricing actions by new entrants can be serious, strategic abuses by established firms also require attention. Indeed, a complete efficiency analysis is not possible until potential abuses of this latter kind are taken into account. Section I examines strategic versus nonstrategic approaches to predatory pricing. Section II deals with mistaken welfare arguments on which Areeda and Turner continue to rely. Potentially misleading statements in their comment are considered in section III. Section IV addresses purported operationality problems that they attribute to my output restraining rule and also discusses previously unremarked operationality difficulties endemic