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CONDUCT OF LARGE PRIVATE CIVIL LAWSUITS Conduct of Large Private Civil Lawsuits • Primary Focus: Settlement • Secondary Focus: Summary Judgment Order of Proceedings • • • • • • Preliminary Negotiations Complaint Motion to Dismiss Part or All Investigation & Discovery Summary Judgment Motions Trial Prep/Negotiations Investigation & Discovery: Interactive Process • Legal Research Set of Relevant Facts to Investigate • Discovery of Facts More Detailed Legal Qs to Research • Theories Change as Get More Info Investigation & Discovery: Goals • Defendant – Limit Info Going to Plaintiff – Identify D Theory of Case (& Support) – Identify Evidence Key to P Theory of Case • Plaintiff: Find Evidence Sufficient to Survive Summary Judgment – Evidence Consistent w P Theory – Evidence Inconsistent w D Theory Investigation & Discovery: Finding Evidence • Witness Interviews • Early Interrogatories – Contentions – I.D. Witnesses & Documents • Document Review (Most Important) • Depositions • Later Interrogatories: What Evidence Supports Claims Order of Proceedings • • • • • • Preliminary Negotiations Complaint Motion to Dismiss Part or All Investigation & Discovery Summary Judgment Motions Trial Prep/Negotiations THEMES OF THIS COURSE 1. Power of Attorneys & Legal Academics to Change the Law HISTORICAL TRENDS • 1945-75: Anti-Big Business Ideology • 1975-92: “Antitrust Revolution” • 1992-2000: Line-Drawing and Some Counter-Revolution • 2001 : ??? THEMES OF THIS COURSE 1. Power of Attorneys & Legal Academics to Change the Law 2. Use of Economics in Legal Argument THEMES OF THIS COURSE 1. Power of Attorneys & Legal Academics to Change the Law 2. Use of Economics in Legal Argument 3. Conducting Complex Civil Litigation THEMES OF THIS COURSE 1. Power of Attorneys & Legal Academics to Change the Law 2. Use of Economics in Legal Argument 3. Conducting Complex Civil Litigation ATTORNEYS MATTER A LOT INTRODUCTION TO THE ECONOMICS OF ANTITRUST ASSUMPTIONS OF CLASSICAL ECONOMICS • PEOPLE ACT RATIONALLY TO MAXIMIZE THEIR OWN INTERESTS ASSUMPTIONS OF CLASSICAL ECONOMICS • PEOPLE ACT RATIONALLY TO MAXIMIZE THEIR OWN INTERESTS • RESOURCES MOVE TO MOST VALUABLE USE IF VOLUNTARY EXCHANGE PERMITTED “VALUE” MEASURED BY AGGREGATE CONSUMER WILLINGNESS TO PAY FOR THINGS “EFFICIENCY” EXPLOITING ECONOMIC RESOURCES TO MAXIMIZE “VALUE” Given these definitions … • Voluntary transactions are “efficient” Given these definitions … • Voluntary transactions are “efficient” • Free market is “efficient” – allows sequences of transactions – resources end up w those who most value them Given these definitions … • Voluntary transactions are “efficient” • Free market is “efficient” – allows sequences of transactions – resources end up w those who most value them • Interference with market by government or cartel is “inefficient” PROBLEMS WITH ASSUMPTIONS • DEFINITION OF “VALUE” • PEOPLE OFTEN IRRATIONAL PROBLEMS WITH ASSUMPTIONS • DEFINITION OF “VALUE” –CONSUMER CULTURE –DEPENDS ON INCOME DISTRIBUTION –MORE $ = MORE VOTES PROBLEMS WITH ASSUMPTIONS • PEOPLE OFTEN IRRATIONAL –OFTEN APPEAR TO ACT AGAINST SELF-INTEREST –OFTEN PERCEIVE SELVES ACTING AGAINST SELFINTEREST PROBLEMS WITH ASSUMPTIONS • Raise Qs About Normative Use of Theory – Claims that results of comp. market always desirable – Claims that interference w comp. market always bad PROBLEMS WITH ASSUMPTIONS • Raise Qs About Normative Use of Theory • Theory Often Describes World Pretty Well PROBLEMS WITH ASSUMPTIONS • Raise Qs About Normative Use of Theory • Theory Often Describes World Pretty Well • ME: Works Best if Addressing Basic Consumer Items DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS: • SUBSTITUTION EFFECT • INCOME EFFECT DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS • SUBSTITUTION EFFECT: AS GOOD BECOMES CHEAPER, BUY IT INSTEAD OF ALTERNATIVES • INCOME EFFECT DEMAND CURVE: GENERALLY BUY MORE OF GOOD THE LESS IT COSTS • SUBSTITUTION EFFECT • INCOME EFFECT: AS GOOD BECOMES CHEAPER, PURCHASING POWER INCREASES, SO BUY MORE DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS (RARE): • INFERIOR GOODS • LUXURY GOODS DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS: • INFERIOR GOODS: GOODS YOU BUY MORE OF, THE LESS $ YOU HAVE • LUXURY GOODS DEMAND CURVE: GENERALLY BY MORE OF GOOD THE LESS IT COSTS EXCEPTIONS: • INFERIOR GOODS • LUXURY GOODS: GOODS YOU BUY BECAUSE OF THE HIGH PRICE FACTORS AFFECTING DEMAND • PERSONAL TASTE • INCOME • PRICE OF COMPLEMENTARY GOODS • PRICE OF SUBSTITUTES FACTORS AFFECTING DEMAND • PERSONAL TASTE • INCOME • PRICE OF COMPLEMENTARY GOODS • PRICE OF SUBSTITUTES FACTORS AFFECTING DEMAND • PERSONAL TASTE • INCOME • PRICE OF COMPLEMENTARY GOODS • PRICE OF SUBSTITUTES FACTORS AFFECTING DEMAND • PERSONAL TASTE • INCOME • PRICE OF COMPLEMENTARY GOODS • PRICE OF SUBSTITUTES DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 TYPES OF PRODUCER COSTS • FIXED v.VARIABLE COSTS • TOTAL v. AVERAGE COSTS • MARGINAL COST FIXED v. VARIABLE COSTS • FIXED COSTS: DO NOT VARY IN SHORT RUN • VARIABLE COSTS FIXED v. VARIABLE COSTS • FIXED COSTS: DO NOT VARY IN SHORT RUN • VARIABLE COSTS: VARY WITH LEVEL OF PRODUCTION TOTAL v. AVERAGE COST • TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE • AVERAGE COST TOTAL v. AVERAGE COST • TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE • AVERAGE COST: MEAN COST PER ITEM PRODUCED TOTAL v. AVERAGE COST • TOTAL COST: ALL COSTS ASSOCIATED WITH PRODUCT LINE • AVERAGE COST: MEAN COST PER ITEM PRODUCED – AVERAGE TOTAL COST – AVERAGE VARIABLE COST MARGINAL COST = ADDITIONAL COST OF PRODUCING ONE MORE UNIT ALL COSTS INCLUDE “NORMAL” PROFIT SUPPLY CURVE = MARGINAL COST CURVE FOR INDUSTRY AS A WHOLE SUPPLY & DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 FACTORS AFFECTING SUPPLY CURVE • TECHNOLOGICAL CHANGE FACTORS AFFECTING SUPPLY CURVE • TECHNOLOGICAL CHANGE • INPUT PRICES SUPPLY & DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 PRODUCERS’ GOAL MARGINAL REVENUE = MARGINAL COST PRODUCERS’ GOAL IN COMPETITIVE MARKET MARGINAL REVENUE = PRICE = MARGINAL COST SUPPLY & DEMAND Demand 30 25 P 20 P 15 10 5 0 1 2 3 4 5 6 7 8 Q 9 10 11 12 13 14 OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM • FUNGIBLE PRODUCT • SUPPLIERS CAN’T AFFECT EACH OTHERS PRICING/OUTPUT • MOBILITY/EQUALITY OF RESOURCE AVAILABILITY • GOOD INFORMATION/LOW TRANSACTION COSTS OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM • FUNGIBLE PRODUCT • SUPPLIERS CAN’T AFFECT EACH OTHERS PRICING/OUTPUT • MOBILITY/EQUALITY OF RESOURCE AVAILABILITY • GOOD INFORMATION/LOW TRANSACTION COSTS OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM • FUNGIBLE PRODUCT • SUPPLIERS CAN’T AFFECT EACH OTHERS PRICING/OUTPUT • MOBILITY/EQUALITY OF RESOURCE AVAILABILITY • GOOD INFORMATION/LOW TRANSACTION COSTS OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM • FUNGIBLE PRODUCT • SUPPLIERS CAN’T AFFECT EACH OTHERS PRICING/OUTPUT • MOBILITY/EQUALITY OF RESOURCE AVAILABILITY • GOOD INFORMATION/LOW TRANSACTION COSTS OPTIMUM CONDITIONS FOR COMPETITIVE EQUILIBRIUM • FUNGIBLE PRODUCT • SUPPLIERS CAN’T AFFECT EACH OTHERS PRICING/OUTPUT • MOBILITY/EQUALITY OF RESOURCE AVAILABILITY • GOOD INFORMATION/LOW TRANSACTION COSTS