In competition litigation, the general concern is that prices will rise. That is, what are the prices before and after the alleged violation? While this premise may be simple, applying it can be challenging. Competition economists are frequently engaged to provide analyses examining how prices may have risen, which can then be introduced as evidence in courts.
Now, why is it difficult to demonstrate that prices are increasing? First, even if we can observe prices over time, we cannot simply compare prices before and after without controlling for other factors that affect prices. For example, gasoline prices may be affected by oil prices. So, higher gasoline prices may be due to a legal violation or higher oil prices. Moreover, prices are constantly changing, and issues in calculating average prices may arise.
A different challenge is that we may not be able to observe some prices. We cannot observe post-merger prices in a proposed merger because the merger has not yet occurred. Using facts and data, economic models can be developed to predict prices after a merger.
We note that price may not be the only competitive concern, as consumers may be worse off in other dimensions, such as quality. Most importantly, competitive analyses often necessitate certain assumptions for the sake of practicality. While information may be available, gathering it may be cost-prohibitive. Hence, economists may not agree on which analyses provide the appropriate guidance. This disagreement may then ultimately be decided by the courts.