Vertical Market Power, the Structure of Tariffs, and Antitrust Policy

Date01 June 1974
DOI10.1177/0003603X7401900216
AuthorPeter M. Costello,Peter J. Ginman
Published date01 June 1974
Subject MatterArticle
VERTICAL
MARKET
POWER.
THE
STRUCTURE
OF
TARIFFS.
AND
ANTITRUST
POLICY
by
PETER
J.
GINMAN·
and
PETER
M.
COSTELLO··
I.
INTRODUCTION
In
light
of
new
developments
in
tariff
theory
this
paper
examines
the
impact
that
selective
tariff
reductions
might
have
as
legal
remedies
in
antitrust
cases
involving
verti-
cally
integrated
oligopolistic
markets!
There
is
reason
to
believe
that
tariff
strategies
are
a
very
important
part
of
the
pricing
and
disciplinary
policies
of
price
leaders
in
vertical
oligopolies.
When
the
new
theory
of
effective
pro-
tection
and
its
focus
on
the
structure
of
tariffs
is
inte-
grated
with
existing
knowledge
of
production
and
pricing
structures
in
vertical
oligopoly,
one
gains
insights
into
the
relationship
between
alternative
tariff
strategies
and
the
enhancement
of
the
industry
leader(s)'
market
power.
The
antitrust
implications
of
these
insights
involve
using
selective
tariff
reductions
on
crucial
inputs
to
directly
inject
greater
and
more
pervasive
competition
than
the
more
traditional
remedies.
Most
importantly,
this
form
of
anti-
*
Assistant
Professor
of
Economics,
SUNY
at
Geneseo.
**
Associate
Professor
of
Economics,
University
of
Bridgeport.
AUTHORS' NOTE:
The
authors
are
indebted
to
the
General
Electric
and
Ettinger
Foundations,
and
to
the
SUNY
Summer
Research
Program
for
financial
support.
I
While
this
paper
concentrates
on
the
case
of
vertical
integration,
this
remedy
may
act
as
a
competitive
catalyst
in
other
market
forms
as
well.
421

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