United States v. AMR Corporation

United States v. AMR Corporation, American Airlines, Inc., and AMR Eagle Holding Corporation (No. 99-1180-JTM) Background: 1. http://www.justice.gov/atr/cases/f2400/2438.pdf (complaint) 2. http://www.justice.gov/atr/cases/f8100/8134.pdf(finaldispositions)

Project description
Task:
Discuss the case above using the theory explained in class. In particular, you must cover:
a) The rationale of the case, i.e. why are these practices (in theory) prohibited? b) The arguments of the government
c) The arguments of the court

Theory explained in class
SESSION 2: TRADITIONAL APPROACHES TO NON COLLUSIVE OLIGOPOLY

TOPIC: “An oligopolistic firm will make higher profits when co-operative policies are
pursued than if it looked after its own self-interest.” Examine rigorously the degree of
support which oligopolistic price theory may, or may not, give to this statement. Does non
collusive oligopoly theory allow us to predict a relationship between market structure and
profitability?
* S Estrin and D Laidler, Introduction to Microeconomics, Harvester Wheatsheaf, 4th

edition, 1995, Ch. 18.

S Martin, Industrial Economics, 2nd
edn, Macmillan, 1994, Ch. 5.

J Lipczynski, J Wilson, J Goddard, Industrial Organization, 3
rd
edn, Prentice Hall, 2009,
pp113-132.

R M Feinberg & T A Husted, Estimating Reaction Functions in Experimental Duopoly
Markets, International Journal of the Economics of Business, February 1999, pp57-63.

SESSION 3: GAME THEORETIC APPROACHES TO OLIGOPOLY

TOPIC: What contribution does game theory make to the question asked for Lecture 2?

* H Varian Intermediate Microeconomics, Norton, 8th
edn, 2010, Ch. 28.

D Besanko, D Dranove & M Shanley, Economics of Strategy, 5
th
edn, Wiley, 2010
pp256-276.

* F M Scherer and D Ross, Industrial Market Structure and Economic Performance,
Houghton Mifflin, 1990, pp208-220.

J Church & R Ware, Industrial Organization, McGraw Hill, Ch. 9 & pp329-340.
15
P Bo & G Frechelte The evolution of co-operation in infinitely repeated games:
experimental evidence. American Economic Review, Feb 2011.

SESSION 4: OLIGOPOLISTIC CO-ORDINATION IN PRACTICE

TOPIC: How are the pricing decisions of oligopolistic firms co-ordinated and what factors
limit such co-ordination?

* F M Scherer & D Ross, op cit., Ch. 7 & 8.

M. C. Levenstein & V. Y. Suslow, What determines cartel success?, Journal of Economic
Literature, March 2006, pp43-95.

D Besanko et al, op cit., pp276-298.

J Church & R Ware, op cit., pp340-357.

SESSION 5: STRATEGIC ENTRY DETERRENCE

TOPIC: How have strategic game theory, and our appreciation of the roles of sunk costs and
uncertainty altered our understanding of entry deterrence?

A Schotter, Microeconomics, Addison Wesley, 1997, pp409-416 & pp419-423 only.

* R Clarke & T McGuinness (ed.), The Economics of the Firm, Blackwell, 1987, Ch. 4.

* D. Waldman & E. Jensen, op cit. pp245-252, pp256-260, & Ch. 11 & 12.

* D Hay & D Morris, Industrial Economics and Organisation, 2nd edn, Oxford University
Press, 1991, pp 85 – 101.

S Martin Industrial Organization in Context. Oxford University Press 2010, pp222-259.

A Goolsbee & C Syverson How Do Incumbents Respond to the Treat of Entry: Evidence
from the Major Airlines. Quarterly Journal of Economics, Nov, 2008.

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