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A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases

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  • Wallace P. Mullin
  • Christopher M. Snyder

Abstract

We propose a simple method, requiring only minimal data, for bounding demand elasticities in growing, homogeneous-product markets. Since growing demand curves cannot cross, shifts in market equilibrium over time can be used to "funnel" the demand curve into a narrow region, bounding its slope. Our featured application assesses the antitrust remedy in the 1952 DuPont decision, ordering incumbents to license patents for commercial plastics. We bound the demand elasticity significantly below 1 in many post-remedy years, inconsistent with monopoly, supporting the remedy's effectiveness. A second application investigates whether the 1911 dissolution of American Tobacco fostered competition in the cigarette market.

Suggested Citation

  • Wallace P. Mullin & Christopher M. Snyder, 2021. "A Simple Method for Bounding the Elasticity of Growing Demand with Applications to the Analysis of Historic Antitrust Cases," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 172-217, November.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:4:p:172-217
    DOI: 10.1257/mic.20190012
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    Citations

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    Cited by:

    1. Marco Stenborg Petterson & David Seim & Jesse M. Shapiro, 2023. "Bounds on a Slope from Size Restrictions on Economic Shocks," American Economic Journal: Microeconomics, American Economic Association, vol. 15(3), pages 552-572, August.
    2. Ajay Bhaskarabhatla & Yiting Deng & Yongdong Liu, 2024. "Open disclosure using invention pledges: a case study of IBM," The Journal of Technology Transfer, Springer, vol. 49(4), pages 1532-1566, August.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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