4. Barriers to Entry

The logic of free-market monopoly theory is said to be enhanced by a discussion of non-legal barriers to entry. Although open markets contain no legal barriers by definition, certain non-legal obstacles are alleged to exist that may hamper the competitive process and allow leading firms to misallocate resources. Presumably, the application of antitrust policy against these barriers increases economic efficiency and consumer welfare.

Product Differentiation

Antitrust enthusiasts argue that the extra costs associated with product differentiation tend to restrict market entry.¹ Firms that would like to enter, say, the automobile industry, understand that they must incur such costs as retooling for annual body-style changes, and these costs can deter entry. If the product were homogeneous, especially homogeneous over time, it would be far cheaper to enter the auto market and, accordingly, there would be more rivals.

Differentiation is also alleged to be an element of monopoly power. Firms that successfully differentiate their products are said to be able to raise their prices above the level possible in a purely competitive market.² Thus, although there may well be intense rivalry among sellers in markets where products are differentiated, the competition is said to be “imperfect,” and resources are still said to be somewhat misallocated.

These arguments are unconvincing. If products have been successfully differentiated—that is, if consumers have expressed a willingness to cover the costs associated with differentiation—then the difficulty of entering markets and competing with established firms relates directly to those revealed consumer preferences. If buyers of automobiles have traditionally supported annual body-style changes and punished firms that did not make them, then clearly it is consumer preferences that have helped limit rivalrous entry into the automobile industry.

While this development might be a problem for particular would-be suppliers, it is not a problem for consumer welfare generally or for efficient resource allocation. Efficient resource use implies that resources should be put to the uses that consumers, not economists, value most highly. If consumers support annual body-style changes, that is the use to which resources should be put. Potential or existing competitors can always attempt to convince consumers to support less product differentiation—at a lower price—or perhaps no year-to-year differentiation at all. Alternatively, potential entrants can always attempt to discover cheaper methods of production and marketing that would allow rivalry with established firms. But, in the absence of such preference changes or discoveries, potential competitors are indeed restricted from production by the performance of rivals and the revealed preferences of consumers. These restrictions are not, however, barriers to entry that can rationalize any antitrust intervention.

From the perspective of antitrust critics, it is entirely appropriate that efficiency and revealed preferences should limit entry and exclude potential rivals, for resources are scarce and have alternative uses. The economic problem is to ensure that scarce resources are put to their highest consumer-valued use and reallocated from less valuable to more valuable uses, which is precisely the social function of the competitive market process. Competition is not restricted by efficiency and consumer choice.

The essential confusion—and it recurs often in antitrust economics—is over the meaning of the term “competition.” If competition means the purely competitive equilibrium, then competition can be inappropriately restricted by product differentiation and producer efficiency. But, as already argued, pure competition cannot be an appropriate welfare standard in antitrust: it is a static equilibrium condition with no competitive process. It assumes homogeneous products and preferences, the existence of suppliers already employing the best technology, and the absence of error or surprise. Resources are efficiently allocated in such a world, but only because the model simply assumes the conditions required for an equilibrium.

The actual competitive process is one of discovery and adjustment; it is not a static state of affairs.³ The economic problem is not one of allocating resources efficiently when everything is known and constant, but of learning how to allocate and reallocate resources in an uncertain and changing world. Competition is an entrepreneurial process of discovering what, in fact, consumers do prefer and which firms, employing which technologies and strategies, will be able to supply those products. The competitive process is not restricted by the failure of specific products or firms; nor is it limited because efficiency and preferences prevent some would-be rivals from competing. Those who say they are preserving competition by preserving specific competitors or by subsidizing new firms to enter markets do not really understand the nature of a competitive market process.

Some critics of differentiation assert that some product differentiation is essentially frivolous, involving no real improvements.⁴ But how are real improvements to be distinguished from cosmetic changes, if not by the revealed preferences of consumers? Critics are entitled to their opinions on these issues, but consumers in a free market have the final word on whether differentiation is worth it or not. If consumers believe that an “improvement” is frivolous, they will not be willing to pay much for it. On the other hand, if they are willing to pay substantially more for some differentiation, then it is demonstrably not frivolous and the resources it uses are not misallocated.

Firms can, of course, make errors and miscalculate consumer preferences. They can underestimate or overestimate the value that consumers are likely to place on any differentiation or innovation. They can expend resources in the present only to discover in the future that they cannot recover those expenses. In such situations, resources have in some sense been wasted.

But this use of the term “waste” must be put in the context of the economic problem that is to be solved in a market economy. Part of the problem is that firms attempt to coordinate their supply decisions with the preferences of consumers before consumers actually reveal their preferences in the marketplace. Firms must correctly anticipate the revealed preferences of both consumers and competitors, and this anticipatory process is filled with risk and uncertainty. Importantly, the problem of plan coordination involves not only price coordination, which most primary economics texts dwell on exclusively, but also product coordination: the product must be precisely the one that consumers prefer. Thus, both price and product must be coordinated before any market can be efficient from a consumer perspective.

Many discussions of competition trivialize this coordination problem by assuming that perfect information concerning consumer tastes and prices already exists or that the market has somehow already selected some standardized product for sale. But this assumption is unrealistic. In actual market situations, firms discover product prices and preferences only through a working out of the competitive market process itself. While there are very strong economic incentives for firms to anticipate consumer preferences and the plans of competitors correctly, resource-allocation mistakes—given the fundamental uncertainty involved—are inevitable. Markets cannot be expected to work perfectly, to realize perfect equilibrium or coordination. All that can be reasonably expected is that the free-market process will tend toward an efficient solution by continually creating information and incentives to reallocate resources from less valuable to more valuable consumer-determined ends.

The Ready-to-Eat Cereals Case

The infamous Federal Trade Commission case against the leading ready-to-eat (RTE) cereal companies is an excellent example of the antitrust confusion over product differentiation, consumer preferences, and barriers to entry.

In 1972, the FTC brought suit against Kellogg, General Foods, General Mills, and Quaker Oats, arguing that the firms’ 90-percent market share constituted monopolization in the RTE cereals industry.⁵ The leading companies competed by proliferating new brands of cereal and variations of old brands; they rarely engaged in direct price competition. According to the FTC, the market-share position of the firms was a direct function of this “wasteful” brand proliferation, which had the effect of severely restricting new-firm entry and competition. The costs and risks associated with developing, producing, and marketing a new cereal brand were generally prohibitive for new companies. In addition, the lack of price competition allowed the leading companies to earn excessive profits over a long period of time. The solution, according to the FTC, was to break up the leading companies and force them to license their popular trademark brand names to would-be rivals.

The FTC was no doubt correct in concluding that the high risk of failure in producing new cereal brands limited market entry. It was also true that certain economies associated with size, especially in advertising, tended to restrict the number of new competitors. But it is not true that any of this was regrettable from any consumer perspective, or that the competitive process was endangered, or that these restrictions could justify any remedial antitrust activity.

Efficiency in the use of resources, including efficiency in the specific types of products produced, can always restrict the number of competitors. As has been argued, the very purpose of the competitive market process is to discover which products consumers prefer, for whatever reason, and then to produce and sell those products to consumers. The fact that leading firms with long experience and economies of scale may be able to accomplish this task more efficiently than smaller or newer organizations is irrelevant from a consumer perspective: consumer welfare is not injured thereby and resources are not misallocated.

The issues can be put another way. If cereal brand proliferation had been unsuccessful from a consumer view-point, the larger companies would have lost market share to other companies and would no longer have been the leading firms in the industry. If cereal costs for the larger companies had been higher—not lower—than their would-be competitors, the larger firms could have lost market share to smaller, more efficient companies and, again, would not have remained leading firms. In short, if the larger RTE firms had not been efficient and successful with their products, they could not have remained the leaders in their industry for decades.

The fact that the leading companies had introduced dozens of new cereal brands successfully in an uncertain market setting was direct evidence of sustained efficiency in the use of resources, not evidence of monopoly power that misallocated economic resources. Consumers were not coerced into purchasing new cereal brands; they were invited to try them. Consumers were not overcharged for differentiated cereal products; they willingly paid more for new brands of cereal they perceived to be more valuable than old brands. Rival manufacturers or would-be competitors who believed this behavior to be irrational on the part of consumers were always free to test their theory of efficient cereal marketing. If consumers really preferred less differentiated cereal brands at lower prices, then the newer or smaller firms would have been able to compete easily.

Actually, the FTC’s successful attempt in the late 1970s to drop the Quaker Oats Company from the original antitrust complaint undermined its entire theory concerning barriers to entry in this case. Quaker Oats had, in fact, accomplished precisely what the FTC had argued was nearly impossible: it had innovated important new products and brands and had increased its market share in an industry dominated by larger companies. Quaker Oats Company had developed a line of so-called natural cereals and persuaded consumers to purchase them, thereby breaking the tight grip of the leading companies on the market. Despite the Quaker Oats episode, the FTC continued to pursue the case—only to lose in 1981 before an administrative judge and then before the full FTC in 1982.

Advertising

Advertising is likewise often criticized as a barrier to entry that limits competition and causes resources to be misallocated. In the academic economist’s perfectly competitive model, there is no advertising since products are assumed to be homogeneous and market information on products and prices is assumed to be perfect. In the real world of differentiated products and ignorance, however, economists have had to account for the appearance of product advertising. Some conclude that advertising allows firms to differentiate products and then charge higher prices for them, and that large advertising budgets can enable large companies to sustain their market share at the expense of smaller rivals and potential entrants. Others argue that, in the absence of perfect information, advertising allows a more efficient plan coordination process between suppliers and consumers by lowering information and search costs. The first group of economists tends to see advertising as an element of monopoly power that generates some social inefficiency⁶; the second, as an element of a competitive process that allows an understanding of how resources are efficiently allocated in an uncertain world.⁷

Since the issue of product differentiation as a barrier to entry has already been discussed, that analysis need not be repeated here. It might be noted, however, that the treatment of advertising by some critics as a superfluous selling expense—as distinguished from other, legitimate production and transportation costs—is totally arbitrary. All business costs are selling costs in the sense that all resources are expended with the purpose of selling products to consumers at a profit. Advertising costs, in this respect, are no different from quality-control costs, tool costs, fire-insurance costs, or any other expenditure made to accomplish some potentially profitable activity. In perfect competition with perfect information, advertising would be unnecessary (so would fire insurance!), but that is irrelevant to the problems that must be solved in a dynamic and uncertain market economy.

It is true, however, that some business organizations perform advertising functions more efficiently than rival firms. Some even achieve substantial economies of scale through effective advertising, earning higher profits as well. These earned efficiencies can be a barrier for less efficient firms, but, again, there is no misallocation of resources. The only obvious waste here is on the part of the firms that advertise less effectively.

But can successful firms earn long-run monopoly returns on their advertising investments? Some early empirical studies appeared to discover a positive relationship between advertising expenditures and firm profitability, and that led some corporate critics to conclude that advertising could generate excessive returns.⁸ Later studies, however, which treated advertising expenditures as an investment rather than as a current business expense, failed to substantiate any adverse advertising profit association.⁹

Even if such a statistical association did exist, it would prove nothing sinister. There is no requirement that the competitive business world conform to the economist’s notion of a long-run equilibrium condition where all market anomalies have been eliminated and all firms are earning the same return. Certainly, there may well be strong tendencies toward an equilibrium condition in an open market, and a notion of equilibration and coordination underlies much of our understanding of an efficient competitive process. But again, long-run business equilibriums are not possible and thus cannot be the relevant benchmark to appraise the market performance of competitive firms.

Efficiency and Innovation

It can be admitted readily that economies and efficiencies achieved by some firms but not by others can delay and even prevent entry and direct market rivalry. Firms that enjoy economies of scale or some low-cost technology or firms that continuously innovate successfully do make market rivalry more difficult or, in the extreme case, even impossible. If it were correct, from a market perspective, to argue that more competitors are always better than less, then economies of scale and successful innovation might be condemned out of hand for “restricting” competition.

But clearly that is not the correct analysis. The exclusions associated with efficiency are appropriate because it is the consumers who ultimately decide to support efficient and penalize less efficient firms. Again, the purpose of the market process is to discover the efficient service, the efficient product, the efficient business organization; competition—both rivalry and cooperation—has nothing to do with some arbitrary number of firms. If consumers want more competitors, they can have them by demonstrating their willingness to pay the higher prices necessary to cover the costs of less efficient or new competitors. Most of the time consumers are unwilling to do so. Certainly, consumer decisions not to support additional competitors are not inefficient; nor do they reduce consumer welfare. Antitrust regulation is not necessary to save consumers from themselves.

The Alcoa Case

The Aluminum Company of America prior to 1937 is a classic example of a dominant firm that maintained its market portion essentially through innovation and industrial efficiency as a barrier to entry. In the lower-court antitrust case decided in favor of Alcoa in 1939,¹⁰ Judge Caffey laboriously determined that Alcoa had not monopolized bauxite (contrary to what many textbooks still report), waterpower sites, alumina or aluminum castings, wire, and other aluminum products. The firm had not illegally monopolized the production of aluminum ingot. Nor had it charged exorbitant prices or earned exorbitant profits. Prices for aluminum ingot—Alcoa’s primary product—declined from approximately $5 per pound in 1887, the year Alcoa was founded as the Pittsburgh Reduction Company, to 22 cents per pound in 1937, the year Alcoa was indicted for monopolization. During that period, profits averaged approximately 10 percent on overall investment. Alcoa had not engaged in any illegal exclusion of potential competitors. The only so-called preemptive purchase of a potential competitor was a Justice Department-approved purchase of a failing French firm in 1915. Given these findings, Judge Caffey dismissed the entire antitrust complaint against Alcoa.

Alcoa had been the only domestic supplier of virgin ingot aluminum for fifty years, even though the patents on the electrolysis process for making aluminum had expired in 1906. Entry into primary aluminum production had proved difficult, even to potential entrants like Henry Ford, because Alcoa enjoyed vast scale economies in production and technological advantages in research and development. Furthermore, Alcoa passed along these economic advantages to buyers in the form of competitive ingot prices, forestalling competitive entry by behaving as if there indeed were potential rival ingot sellers anxious to steal Alcoa’s customers and overwhelming market share. Only as a consequence of such superior economic performance did Alcoa hold a “monopoly” market share in virgin ingot.

The lower court had made an important distinction between being “a monopoly” and “monopolizing” in restraint of trade. For Judge Caffey, being a monopoly—absent any unfair exclusionary practices—was reasonable and not a violation of the Sherman Antitrust Act, which did not condemn monopoly per se. A business might achieve a dominant market position by, for example, being more efficient than its rivals, and the law was not intended to condemn such situations.

The appeals court that reversed Judge Caffey’s decision and decided against Alcoa in 1945 also agreed that Alcoa had been efficient. But Judge Hand, breaking with the rule of reason, determined that Alcoa’s “skill, energy, and initiative” had excluded competition and that efficiency was not a legal excuse for monopolization. He wrote in his decision:

It was not inevitable that it [Alcoa] should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.¹¹

Alcoa’s competitive strengths actually sealed the antitrust case against it. If the company had been less efficient, presumably there would have been more competition, i.e., competitors, and no violation of the law. Such is the twisted economic logic of antitrust in the Alcoa case.

Actually there were competitors, although the appeals court in 1945 steadfastly refused to recognize them. Hundreds of rival firms sold what is termed “secondary aluminum,” or scrap aluminum ingot, which was then a near-perfect—and hence, competitive—substitute for Alcoa’s own primary ingot. If one includes the sale of secondary ingot, Alcoa’s share of the relevant market dropped from 90 percent (the remaining 10 percent share going to aluminum imports) to 66 percent, and then, with other reasonable adjustments, to 33 percent. Alcoa was not even monopolizing any reasonably defined relevant market.

Capital

It is sometimes held that financial capital can be a barrier to competitive entry and can allow leading firms to monopolize. Some would-be producers, the argument goes, must pay a higher price for capital than already established businesses.

All scarce resources have prices that must be paid in order to allocate (or reallocate) them to higher-valued uses. Financial capital, like all resources, cannot be free to all who would want to use it, and its costs must be borne by those who intend to employ it productively.

The explicit cost of capital is determined in competitive capital markets, and firms that would purchase it must do so at freely determined market prices. Some firms are able to acquire capital at lower prices because their demonstrated risks for using capital effectively are lower. A firm in business for more than fifty years, with a continuous record of profitable returns on its investments, will likely have lower capital costs than some new firm with little experience employing capital successfully.

Thus, capital costs can be a barrier to entry. More efficient users of capital will tend, all else being equal, to exclude less efficient users of capital from the market. But efficiency as a barrier is hardly unfair or injurious to consumer welfare. Indeed, such a barrier—and the exclusionary process it implies—is absolutely essential to ensure that scarce capital flows to those firms most likely to employ it profitably in the service of consumers. Since thousands of new firms do obtain capital and do eventually succeed and expand, this so-called barrier to competition can be overcome like all other non-legal barriers; by superior economic performance. And that, from the perspective of consumer welfare, is exactly the way that it should be. The only rationale for government policy here would be to eliminate any legal barriers that might restrict buyer or seller access to debt or equity markets.

Predatory Practices

“Predatory” price cutting implies that leading firms can price their products in ways that adversely affect rivalry or potential rivalry. Firms might, for example, temporarily price below cost in an attempt to eliminate rivals or discourage potential entry into markets. The term “non-price predatory practices” implies that leading firms can employ a non-price competitive variable—such as a product innovation or advertising—in ways that raise a competitor’s costs or render the demand for a competitor’s product or service obsolete. In the watch industry, for instance, some leading firm might suddenly introduce a revolutionary new watch that tends to make the demand for the watches of smaller competitors obsolete. The effect of this innovation, it is alleged, might be to reduce competition substantially and harm consumer welfare.

Although the word “predation” sounds antisocial, there are important difficulties with any attempt to use antitrust policy to restrain such rivalrous behavior. In the first place, how are the regulators and the courts to distinguish truly predatory practices from the normal price reductions and exclusions that occur during any competitive market process? Are prices below money costs always predatory? And which costs are relevant for such determinations? Average costs? Marginal costs? Long-run marginal costs? Why are historical accounting costs relevant at all? Although there has been an extensive discussion (some would say too extensive) of some of these questions in the professional journals over the years, no clear answers have emerged.¹²

Even if economists could agree on what is meant by predatory pricing, it is not obvious why such pricing behavior should be legally restricted. After all, predatory practices cannot succeed without direct consumer-buyer support. For example, if prospective buyers ignore a leading firm’s price reductions, then those reductions clearly cannot be predatory. On the other hand, if buyers alter their preferences and support the price cutter, it is the buyers—not the price cutter—that put pressure on the high-price firms and may ultimately eliminate some of them. Buyers can always eliminate certain competitors by altering their buying preferences and choosing one product, for whatever reason, over another. There is no reason for antitrust to interfere in this benign process.

Antitrust enthusiasts might argue that buyer choices to reward the price cutter are not in the long-run interests of buyers. But no one can know the long-run interests of buyers. Furthermore, the superiority of so-called long-run interests to short-run interests cannot be assumed. Buyers can surely decide their own time preferences and then decide whether the advantages of short-run price reductions exceed the possible disadvantages of fewer suppliers in the future. Consumer choices are rational either way, and consumer welfare is reduced only when government antitrust policy prevents consumers from determining the market-supply structure they apparently do prefer.

The same argument holds with respect to non-price predatory practices; indeed, the relevant issues are exactly the same. If a leading firm introduces some product innovation, it is up to consumers to decide whether the innovation will reduce the number of competitors, if consumers enthusiastically support the innovation at the expense of competitive products, then some rival suppliers may well be eliminated. On the other hand, if consumers do not support the innovation, the innovation cannot threaten competition and cannot be predatory. In neither scenario is there a legitimate rationale for regulatory preferences superseding the revealed preferences of buyers with respect to the pace and nature of technological change. Indeed, it would be difficult to imagine an antitrust intervention as potentially dangerous or damaging to future consumer welfare as this sort of innovation regulation.¹³

Some economists, notably John McGee, have argued that predatory practices are not normally rational or efficient ways of gaining or holding market share.¹⁴ Firms that engage in predatory pricing, for instance, stand to lose a considerable amount of revenue, and profit, in funding a predatory war. If the firm is large and the war is long, the costs and risks are sure to create substantial disincentives to engage in it. In addition, target competitors may not be easily driven from business, or, even if they are, their assets may be acquired by new firms willing to compete as soon as the predatory price is lifted. In short, considerable financial risks are associated with price predation, and such risks may create powerful disincentives to engage in it, especially in industries with no legal barriers to entry.

There are very few unambiguous examples in business history of leading firms attempting to secure, or hold, near-monopoly positions by engaging in extensive predatory practices.¹⁵ Even the allegedly classic examples of predatory practices in the nineteenth-century petroleum and tobacco industries, involving Standard Oil and American Tobacco, are either exaggerated or unfounded. Standard Oil, as already argued, secured its market position in petroleum primarily through internal efficiency and merger, not systematic predatory practices. And while the American Tobacco Company may have occasionally employed severe price competition to gain market share—the great “snuff war” comes to mind—no general predatory policy would have been intelligent in an industry like tobacco, where there were thousands of competitive suppliers and no barriers to market entry.¹⁶ Even when such pricing wars did occur in the tobacco industry, consumers enjoyed them immensely by purchasing greatly increased amounts of tobacco products at very low prices for years. There is no obvious reason why antitrust regulation should restrain such occasional practices that clearly benefit consumers.

Conclusions

The purpose of this discussion has been to argue that non-legal barriers to entry cannot rationally support free-market monopoly theory or justify antitrust intervention. Business experience, economies of scale, advertising efficiencies, successful product innovation, and dozens of other competitive advantages that business organizations earn may well inhibit the entry of would-be suppliers, but such limitations and exclusions are not inefficient, do not injure consumers, and—most importantly—do not reduce competition in the marketplace.

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¹Joseph S. Bain, Barriers to New Competition (Cambridge, Mass.: Harvard University Press, 1956); and idem, Industrial Organization (New York: John Wiley and Sons, 1968).

²See, for example, the discussion in Phillip Areeda, Antitrust Analysis: Problems, Text, Cases, 2nd ed. (Boston: Little, Brown, 1974), pp. 17–23.

³Israel M. Kirzner, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973).

⁴See, for example, the discussion in Ralph T. Byrns and Gerald W. Stone, Economics, rev. ed. (Glenview, III.: Scott, Foresman, 1984), p. 607. See also Willard F. Mueller, “The Anti-Antitrust Movement,” in Industrial Organization, Antitrust, and Public Policy, John V. Craven, ed. (Boston: Kluwer-Nijhoff, 1983), pp. 30–31.

⁵In the Matter of Kellogg Company, General Mills, Inc., General Foods Corporation, the Quaker Oats Company, FTC Docket No. 8883, complaint issued April 26, 1972.

⁶Joan Robinson, The Economics of Imperfect Competition, 2nd ed. (New York: St. Martin’s Press, 1961). See also the discussion in Douglas F. Greer, Industrial Organization and Public Policy (New York: Macmillan, 1980), pp. 44–84.

⁷Philip Nelson, “Advertising as Information,” Journal of Political Economy 82 (July/August 1974): 729–54; Yale Brozen, “Entry Barriers: Advertising and Product Differentiation,” in Industrial Concentration: The New Learning, Harvey Goldschmid, H. Michael Mann, and J. Fred Weston, eds. (Boston: Little, Brown, 1974), pp. 115–37.

⁸See, for example, William S. Comanor and Thomas A. Wilson, “Advertising, Market Structure, and Performance,” Review of Economics and Statistics 49 (November 1967): 423–40.

⁹Robert Ayanian, “Advertising and Rate of Return,” journal of Law and Economics 18 (October 1975): 479–506; Harry Bloch, “Advertising and Profitability: A Reappraisal,” Journal of Political Economy 82 (April 1974): 267–86.

¹⁰The lower-court decision is United States v. Aluminum Company of America, 44 F. Supp. 97 (1939). The appeals-court decision is United States v. Aluminum Company of America, 148 F. 2nd. 416 (1945).

¹¹United States v. Aluminum Company of America, 148 F. 2nd., (1945) pp. 430–31.

¹²See, for example, Phillip Areeda and Donald Turner, “Predatory Pricing and Related Practices under Section 2 of the Sherman Act,” Harvard Law Review 88 (February 1975): 697–733; and Oliver E. Williamson, “Predatory Practices: A Strategic and Welfare Analysis,” Yale Law Journal 87 (December 1977): 284–340. Also see Dominick T. Armentano, “Antitrust Reform: Predatory Practices and the Competitive Process,” Review of Austrian Economics 3 (1989): 61–74.

¹³For a discussion of the antitrust attack on innovation, see Betty Bock, The Innovator as an Antitrust Target, Conference Board Information Bulletin no. 174 (1980).

¹⁴John S. McGee, “Predatory Price Cutting: The Standard Oil (N.J.) Case,” Journal of Law and Economics 1 (October 1958): 137–69.

¹⁵Ronald H. Koller, “The Myth of Predatory Pricing: An Empirical Study,” Antitrust Law and Economics Review 4, no. 4 (Summer 1971): 105–23.

¹⁶Dominick T. Armentano, Antitrust and Monopoly: Anatomy of a Policy Failure, 2nd ed. (Oakland, Calif.: Independent Institute, 1990), pp. 85–95.