The Simple Franchise Bidding Scheme

Demsetz contends that even though efficiency considerations may dictate that there be only one supplier in a natural monopoly industry, the unregulated market price need display no elements of monopoly. Conventional analysis is flawed by a failure to distinguish between the number of ex ante bidders and the condition of ex post supply. Even

Franchise Bidding Elaborated

It will be useful to examine franchise contracts of three types: once-for-all contracts, which appear to be the type of contract envisaged by Stigler; incomplete, long-term contracts, which are favored by Demsetz; and recurrent short-term contracts, which Posner endorses. 1. Once-For-All Contracts  Stigler’s views on franchise bidding are limited mainly to an endorsement of

Franchise Bidding for Natural Monopoly: A Case Study

The requisite level of detail for assessing the efficacy of an organizational mode will vary with the circumstances. There plainly are regulatory matters for which detail of the kind developed above is unnecessary. The level of detail at whioh much of the regulatory dialog is conducted is often too ag- however, to ascertain “how

Franchise Bidding for Natural Monopoly: Concluding Remarks

Whatever their origins, the cost of good intentions needs to be evaluated. The comparative institutional approach to the study of economic organization is precisely designed to do that. This chapter examines the efficacy of franchise bidding schemes as an alternative to regulation in the provision of public utility services in circumstances where there are

The Oakland CATV Franchise Bidding Experience

Although the case study reported below cannot claim to be representative, it does reveal that many of the franchise concerns disscused in Chapter 13 are not purely imaginary. The study both indicates the importance of evaluating proposals to scrap regulation in favor of market alternatives in more micro-analytic terms and discloses that, in practice,

Antitrust Enforcement: Merger Policy

Changes in public policy toward vertical and conglomerate mergers have been described in Chapters 4 and 11. They do not require repeating here. The proposition that public policy toward mergers had undergone significant transformation is difficult to appreciate, however, without a statement of specifics. I attempt to give some background here. 1. The 1960s 

Antitrust Enforcement: Nonstandard Contracting

The inhospitality tradition to which 1 referred earlier9 held that nonstandard modes of contracting were presumptively anticompetitive. The argument, moreover, was very sweeping. No effort was made to delimit applications to a subset of activity where the anticompetitive concerns were thought to be especially severe. Rather, customer, territorial, and related contract restraints were held

Antitrust Enforcement: Strategic Behavior

The study of strategic behavior—by which 1 mean efforts by established firms to take up advance positions in relation to actual or potential rivals and/or to respond punitively to new rivalry—is enormously complex. The early entry barrier models emphasized ex ante positioning.15 More recent work on predatory pricing has emphasized ex post responses. Objections

Antitrust Enforcement: Unresolved Dilemmas

The study of strategic behavior has made remarkable progress during the past five years. A number of troublesome problems nevertheless remain. These include (1) whether efforts to curb predation should focus primarily on price and output or if other aspects of rivalry should be included; (2) inasmuch as rules governing predation set up incentives

Antitrust Enforcement: Concluding Remarks

The 1960s was a decade when nonstandard modes of economic organization were presumed to have monopoly purpose and effect. Antitrust was preoccupied with measures of concentration and entry barriers. Such a narrow formulation facilitated easy enforcement, but sometimes at the expense of an informed welfare assessment of the issues. Three factors contributed to this

Conclusions of Transaction Cost Economics

John R. Hicks advises that since economics is concerned with a changing world, “a theory which illumines the right things now may illumine the wrong things another time. [Accordingly], there is … no economic theory which will do for us everything we want all the time. . . . We may [someday] reject our

Transaction Cost in Economics

Transaction cost economics acknowledges that technology and ownership of assets arc both important, but it maintains that neither is determinative of economic organization, nor are both together. Rather, the study of economic organization has to go beyond technology and ownership to include an exam- ination of incentives and governance. Transaction cost economics maintains that

Transaction Cost in Law

Ronald Gilson advances the novel and controversial view that business lawyers should be thought of as “transaction cost engineers” (1984). Such an approach ascribes value enhancement to the job of transaction design, which is a theme advanced repeatedly in this book.15 It emphasizes and gives content to the affirmative side of lawyering. Transaction cost

Transaction Cost in Organization

Unlike economists, sociologists have long been concerned with the puzzle, “Why are there so many kinds of organization?” (Hannan and Freeman, 1977, p. 936). Although numerous interesting explanations for organizational variety have resulted, the explanation favored here—namely, organizational variety arises in the service of transaction cost economizing—was not natural to and is still resisted

Transaction Cost Economics: Postscript

Schumpeter posed the question “Can capitalism survive” to which he ventured the opinion, “No. I do not think that it can” (1942, p. 61). Lack of intellectual support for—indeed, prevailing intellectual skepticism regarding—the merits of capitalist modes of organization was among the factors that led to that negative assessment (Schumpeter, 1942, chap. 13). Forty

Systems Everywhere

If someone were to analyze current notions and fashionable catchwords, he would find “systems” high on the list. The concept has pervaded all fields of science and penetrated into popular thinking, jargon and mass media. Systems thinking plays a dominant role in a wide range of fields from industrial enterprise and armaments to esoteric

On the History of Systems Theory

As we have seen, there is a consensus in all major fields— from subatomic physics to history—that a re-orientation of science is due. Developments in modern technology parallel this trend. So far as can be ascertained, the idea of a “general system theory” was first introduced by the present author prior to cybernetics, systems

Trends in Systems Theory

At a time when any novelty, however trivial, is hailed as being revolutionary, one is weary of using this label for scientific de- velopments. Miniskirts and long hair being called teenage revolution, and any new styling of automobiles or drug introduced by the pharmaceutical industry being so announced, the word is an advertising slogan

The Quest for a General System Theory

Modern science is characterized by its ever-increasing specializa- tion, necessitated by the enormous amount of data, the complexity of techniques and of theoretical structures within every field. Thus science is split into innumerable disciplines continually generating new subdisciplines. In consequence, the physicist, the biologist, the psychologist and the social scientist are, so to speak,

Aims of General System Theory

We may summarize these considerations as follows. Similar general conceptions and viewpoints have evolved in various disciplines of modern science. While in the past, science tried to explain observable phenomena by reducing them to an interplay of elementary units investigatable independently of each other, conceptions appear in contemporary science that are concerned with what