Professor McCann responds to my earlier post about the Globetrotters use of exclusive contracts, and more generally, erroneously inferring monopoly power from the observation of a single firm winning the competition for exclusives:
While I understand Wright’s theoretical point, I find it hard to imagine how there can be actual competition for the exclusivity contracts when only one actor–an apparent monopoly–has the market power to obtain them. Along those lines, Professor Geoffrey Man(n)e (Lewis and Clark Law School) responds wryly to Wright in the comments section:
If the Globetrotters donâ€™t have monopoly power in the well-established comedic, traveling, staged, exhibition basketball market, then what meaning does â€œmarketâ€? possibly have?
The point is not merely a theoretical one. There is a theoretical component, of course: competition-for-contract is an important element of competitive process and we should be careful about making anticompetitive inferences from vigorous rivalry of this sort. Professor McCann responds that the Globetrotters are “an apparent monopoly,” and therefore there cannot be meaningful competition-for-contract since they are the only firm able to coerce arenas into granting exclusive windows.
The Globetrotters’ monopoly position is not apparent to me. But this simply begs the empirical question: in what market do the Globetrotters have monopoly power? McCann appears to assume that the appropriate market definition lies somewhere between exhibition basketball and “comedic, traveling, staged, exhibition basketball in striped red, white, and blue pants” (Ok, I added the last part on my own). I concede that we can find a market definition under which the Globetrotters have a monopoly without much effort. But the question is whether we have the defined the relevant antitrust market?
I did not spend much time in my last post justifying my position that the Globetrotters do not have any such monopoly power, only noting that:
In the competitive market for consumersâ€™ entertainment dollars, I am highly skeptical that the Globetrotters even come close to satisfying this condition.
Why am I so skeptical while the monopoly is so apparent to Professor McCann?
Antitrust economics tells us that the answer to this question lies in an analysis of the elasticity of demand for exhibition basketball. The assumption behind my skepticism is that consumers would response to increased Globetrotter ticket prices by substituting to other forms of entertainment: college basketball, the circus, concerts, going to the movies, a baseball game, etc. Now, the data may ultimately prove my assumption about the appropriate market definition wrong (though I doubt it).
Bottom line: there are two paths that one can take to arrive at the conclusion that the Globetrotters have monopoly power. The first is that the presence of exclusivity windows implies monopoly power. The competition-for-contract point renders this inference inappropriate. The second is an empirical path: the Globetrotters have the power to control market prices in some well defined antitrust market. Obviously, Professor McCann and I have different priors on this subject, and neither of us is doing more than casual empiricism here. That said, I remain skeptical that the Globetrotters possess monopoly power — and at a minimum, do not see how the presence of such power is obvious. It should also be noted that monopoly power is a necessary but not sufficient condition for anticompetitve harm deriving from exclusive contracts.
P.S. Geoff, I am not quite sure if you are cited for the proposition you were aiming for in the comments. Then again, I may be missing something.