Abstract

Issues of productive capacity can play a role in nearly every aspect of competition analysis. This article provides an overview of the economic literature on capacity and the role that capacity has played in actual antitrust and competition law enforcement. The goal is to aid the analysis in matters where capacity issues potentially play a significant role. For the most part, the theoretical role of capacity in various aspects of competition analysis is ambiguous and the empirical literature is similarly inconclusive. Moreover, in many situations, measuring excess capacity may be quite difficult. Given the theoretical and empirical ambiguity regarding the role of excess capacity, or the lack thereof, the overall conclusion is that capacity issues should play a role in competition analysis only when there is strong case-specific evidence regarding their effects.

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