The Economics of Adaptation and Long-term Relationships
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The Economics of Adaptation and Long-term Relationships

Dean V. Williamson

Do institutions matter in economic theory? Or is the economic analysis of institutions a distraction from the most important action? Indeed, does Vernon Smith’s notion of the “institution-free core” of formal economic theory encompass that most important action? To explore this question, this book opens with an informal tour of the economics of system design out of which an economics of adaptation ultimately emerged. The book then offers explorations, via the application of the economics of adaptation in both law and economics relating to how parties manage relationships within the firm, within the context of long-term contracts, and, most vividly, within the context of antitrust conspiracy.
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Chapter 3: Platform competition, the Apple eBooks case and the meaning of agreement to fix prices

Dean V. Williamson


Looking out on the devastation wrought by the English Civil Wars, political philosophers found themselves contemplating how to harness collective action to obviate problems of collective irrationality.With the advent of competition law more than two centuries later, American courts were situated to take up certain manifestations of collective action: those that obtain from conspiracy to restrain trade.Building on the game theory advances of 1950, economists found ways to characterize the governance of antitrust conspiracies as the mechanisms by which conspirators harness collective action among themselves to obviate, or at least mitigate, their own problems of collective irrationality (profit-diminishing competition).Characterization of the governance of conspiracies can impose structure on the meaning of agreement in the antitrust case law to unreasonably restrain trade.From a governance perspective, the district court’s analysis of agreement in the Apple eBooks price-fixing case,952 F.Supp.2d 638 (S.D.N.Y. 2013), would appear truncated.

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