Managerial Economics Article Essay Example | Topics and Well Written Essays - 250 words

Managerial Economics Article - Essay Example Huettner discusses the L&L Enterprises v. U.S Brass, a case in which the plaintiff held that the copper pipes and polybutylene pipes comprised of different antitrust product markets. On the other hand the defendant held that both copper pipes and polybutylene pipes were in similar antirust product market. Nonmetals, both the plaintiff and the defendant based their arguments on the provisions and guidelines by the Department of Justice. A wide range of microeconomic, antitrust economic as well as managerial economic literature contend that there lacks quantitative standard upon which close substitutes could be defined. Thus, practitioner divergence reflects the prevailing failure of economic theory to offer a quantitative definition of close substitutes. According to various economists, prices of close substitutes should keep track of each other such that they should have one price existing in the market. Nonetheless, practitioners are opposed to this rule. Perhaps, this explains why there has been unceasing controversy regarding the one-price rule in reference to Sun operating systems and Microsoft operating systems which sell at prices about 50 and 100 percent respectively, yet they are close substitutes. Basing on this argument, the author concludes that the one-price rule should be applied to close substitutes. This implies that close substitutes should have the same price, a price ration of one and should track each other closely over time. In addition, close substitutes should have a cross-price elasticity of unity. On the other hand, products that are not close substitutes should not keep track of each other closely over time. They should also have unequal prices as well as price ratio that differ from unity. Huettner, David A. "Antitrust Bulletin Product market definition in antitrust cases when products are close substitutes or close complements.†. Highbeam Business,