Amitai Aviram’s research while affiliated with Illinois College and other places

Market power is not ubiquitous; it is limited to certain products, in certain areas, and to certain times. Understanding the limits of the market power possessed by a firm in a given case is essential to the correct assessment of the firm's behavior and its antitrust implications. The most common method used to identify the scope as well as the strength of a firm's market power is through the definition of relevant markets, calculation of market share and identification of relevant market conditions (e.g., barriers to entry). Correct assessment of suspected market power should relate to all the limits on that power. For that reason, when exploring the possibility that a certain firm possesses market power, a product market definition is of limited use without the support of the relevant geographic market definition. This is also true of temporal restraints on market power. Some firms may be expected to possess market power (within certain product and geographical bounds) continuously, until a substantial and unexpected change in the industry diminishes their market power or changes its boundaries.

Scholarship on private legal systems (PLS) explains the evolution of norms created and enforced by PLSs, but rarely addresses the evolution of institutions that form PLSs. Such institutions are assumed to form spontaneously (unless suppressed by law) when law is either unresponsive or incapable of directing behavior in welfare-maximizing manners. But, as this paper demonstrates, PLSs typically cannot form spontaneously. Newly formed PLSs cannot enforce cooperation since the effectiveness of mechanisms used to secure this cooperation (e.g., the threat of exclusion) depends on the PLS's ability to confer benefits to its members, and newly formed PLSs do not yet confer such benefits. Successful PLSs bypass this barrier by building on extant foundations - preexisting institutions that already benefit members, typically through functions requiring less costly enforcement. The threat of losing preexisting benefits disciplines members to abide by the PLSs' rules, which in turn allows the PLSs to regulate behavior. This pattern indicates that rather than developing spontaneously, PLSs develop in phases, initially facilitating activities that are unrelated to regulating behavior and incur lower enforcement costs, the provision of which enables the PLS to regulate behavior in the second stage.

The private ordering literature examines how nongovernment institutions mitigate opportunistic behavior in transactions. It emphasizes two elements that facilitate cooperation and reduce opportunism: repeated play and reputation. This paper explores the implications of a third element: network effects. Network effects create an incentive for a unique form of opportunism that exists only in network environments - degradation. On the other hand, network effects facilitate mechanisms that may be very effective in mitigating opportunism. Therefore, in certain industries, networks mitigate opportunism, largely displacing in that role the parties to the transaction and the government. This paper identifies mechanisms used by networks to reduce opportunism, and market characteristics that are conducive to the effectiveness of these mechanisms (and therefore to the efficiency of networks as regulators). This helps explain the prevalence of networks in certain markets as compared to others, and gives tools to assess networks' ability to self-regulate and anticipate the type of opportunism that is more likely to plague a given environment.