- Analyzing antitrust behavior centers around market
- Market power is the ability a firm has to set prices above marginal cost while still being able to sell goods
- Varies greatly between different industries
- Varies greatly between products within the same industry
- We’ll develop a quantitative measure of market power.
- Government funded a small firm, Newport Medical Instruments, to
create an inexpensive ventilator
- A big company, Covidien, produced more expensive ventilators
- Fearing competition from the inexpensive ventilators, Covidien purchased Newport Medical Instruments and shut down the project
- “Firms have incentives to acquire innovative targets to discontinue the development of the targets’ innovation projects and preempt future competition” Cunningham, Ederer, and Ma (2019)
- These types of acquisitions have been termed “killer acquisitions”
- As a society, should we be concerned about these types of acquisitions?