Nonlinear pricing without market power; what could be learned from the contestable markets approach?

This chapter describes the theory of monopoly. In a monopoly market, there are many buyers and a single vendor of a good. The single vendor is called the monopoly. Buyers are assumed to be price takers, and their demand as a function of price is given, as in the case of perfect competition, by an aggregate demand function. One reason one might find a monopoly industry is because, while other companies can enter this industry, the monopoly acts in a way that forestalls potential competitors. If substitute products are produced and sold, they restrain the monopoly's market power by flattening and shifting-in the monopoly's demand curve. The idea of substitutes for a monopoly product comes up in another context — that of multigood monopolies. The chapter then looks at nonlinear pricing.

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Application of the Concept of Significant Market Power in Electronic Communications

Acta Juridica Hungarica ◽

10.1556/ajur.47.2006.3.-6 ◽

2006 ◽

Vol 47 (3) ◽

pp. 314-323

Author(s):

Mária Kitti Popovics

Keyword(s):

Market Power ◽

Electronic Communications

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Vertical Boilerplate

10.31228/osf.io/svk6p ◽

2017 ◽

Author(s):

James Gibson

Keyword(s):

Market Power ◽

Real World ◽

Empirical Work ◽

Full Scale ◽

Market Mechanism ◽

Law School ◽

Information Cost ◽

Information Costs ◽

Policy Proposals ◽

Radical Solution

Despite what we learn in law school about the “meeting of the minds,” most contracts are merely boilerplate—take-it-or-leave-it propositions. Negotiation is nonexistent; we rely on our collective market power as consumers to regulate contracts’ content. But boilerplate imposes certain information costs because it often arrives late in the transaction and is hard to understand. If those costs get too high, then the market mechanism fails. So how high are boilerplate’s information costs? A few studies have attempted to measure them, but they all use a “horizontal” approach—i.e., they sample a single stratum of boilerplate and assume that it represents the whole transaction. Yet real-world transactions often involve multiple layers of contracts, each with its own information costs. What is needed, then, is a “vertical” analysis, a study that examines fewer contracts of any one kind but tracks all the contracts the consumer encounters, soup to nuts. This Article presents the first vertical study of boilerplate. It casts serious doubt on the market mechanism and shows that existing scholarship fails to appreciate the full scale of the information cost problem. It then offers two regulatory solutions. The first works within contract law’s unconscionability doctrine, tweaking what the parties need to prove and who bears the burden of proving it. The second, more radical solution involves forcing both sellers and consumers to confront and minimize boilerplate’s information costs—an approach I call “forced salience.” In the end, the boilerplate experience is as deep as it is wide. Our empirical work should reflect that fact, and our policy proposals should too.

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