Much ado about the Post-Chicago School

• Author: Sónia De Carvalho
• Pages: 283-297

Much ado about the Post-Chicago School

Assistant professor Sónia De CARVALHO1

Abstract

In the middle of the 80s, an economic approach, that brings together a group of

academics that stand out by the harsh criticisms to the approach of the School of Chicago

towards competition, arouses interest amon g the scholars. This school will call into

question some of the foundations and justifications presented by the Chicago School, by

questioning, in first pla ce, the single monopoly profit theory. In this sense, these authors

will develop a set of models designed to demonstrate that the monopolist in the primary

market ha s incentives to monopolize the secondary market. This School will also analyse

the vertical restraints, standing out the development of Raising Rivals´ Costs Theory and

offer an explanation for free-riding. The Chicago School, on the other hand, is a coherent

and heterogeneous economic school, responsible for the theory of oligopoly and collusion,

which, by advocating the criminalization of price fixing, proceeded to analyse the

anticompetitive effects o f predatory pricing and various restrictions vertical. In this paper,

we aim at d emonstrating that the roots of the Post-Chicago School go back to the Chicago

School, highlighting the contributions of Director and Levi in the construction of the

Raising Rivals´ Cost Theory and, considering the connection between the Chicago school

and Transaction Costs Economics, the most complete empirical analysis of this th eory led

by Elizabeth Granitz and Benjamin Klein. The continuous omission of the Transaction

Costs Economics, considering the steadiness between both, is one of the most negative

aspects of this school, which can only be explained by the fact that heterogeneity of th e

Chicago School and Transaction Costs Economics unmask much of the criticism knitted.

Post-Chicago S chool, as we will conclude, will be incapable of thwarting the ideological

premises of the Chicago School.

Keywords: Chicago School, antitrust law, the Raising Riva ls' Costs theory, Post-

Chicago School.

JEL Classification: K22

However, in the hands of Chicago School proponents,

economics has become an engine for an ideology hostile to

the operation of antitrust law.”

Thomas M. Melsheimer, Economics and Ideology:

Antitrust in the 1980s, STAN. L. REV., Vol 42, 1990, p. 1335.

1. Introduction

This School will also analyse the vertical restraints, highlighting the

development of the Raising Rivals Costs Theory.

1 Sónia de Carvalho - Department of Law, Portucalense Infante D. Henrique University; Researcher at

IJP - Portucalense Institute for Legal Research, Porto, Portugal, scarvalho@upt.pt.