Industrial Organziation

An applied area of macroeconomics is industrial organziation. Increasingly the study of economics intersects with the study of law and one of the oldest examples of this intersection is anti-trust.

A recent Supreme Court Case illustrates this intersection and has been featured prominently in both the media as well as two economic education sites. Greg Mankiw mentioned the resale price maintenance case in a March 26 blog and Aplia followed up on March 29 with an outstanding article analysis and problem that is suitable for classroom use.

Justices Hear Arguments About Pacts on Pricing

WASHINGTON, March 26 New York Times— A 96-year-old rule that treats as an automatic antitrust violation any agreement between a manufacturer and its retailers to adhere to a minimum resale price is considered archaic and out of touch by the Bush administration and economists of the Chicago school.

Wall Street Journal (subscription required):

MSRP Case Seems to Split Justices
Rule Barring Manufacturers From Dictating Prices To Retailers Is Challenged

Hearing arguments in a case about retail prices, the Supreme Court's justices seemed divided over whether to overturn a 96-year-old antitrust ruling intended to promote competition.

In yesterday's case, Leegin Creative Leather Products of Industry, Calif., challenged the ruling, which prohibits manufacturers from requiring retailers to sell their products for a set minimum price. A Texas federal district court cited the 1911 precedent in tossing out the "resale price maintenance" policy Leegin had imposed on Kay's Kloset, a Dallas-area boutique.

Kay's Kloset, owned by PSKS Inc., brought the suit so it could sell Leegin's Brighton line of women's accessories at a discount.