Vertical Integration and Media Regulation in the New Economy markup for capital costs. While well-designed to protect Fisher Body against opportunistic behavior by GM, Klein, Crawford, and Alchian contend that the contract was not well-designed to protect GM again opportunistic behavior by Fisher Body. When the demand for metal bodied automobiles increased dramatically, Fisher Body was able to use capital investments much more efficiently than the original contract had envisioned, and the existing formula allowed Fisher Body to charge GM prices that overcompensated it for its capital costs. In addition, Klein, Crawford, and Alchian argue that Fisher Body maximized its own profits by employing labor-intensive production methods thatwere technologically inefficient and by refusing to locate its plants near GMs Unable to manage its ntionship with its input supplier through contractual devices, GM was left with no choice but to vertically integrate backwards into body fabrication by acquiring Fisher Body Free Riding. Free riding represents another type of opportunistic behavior that can cause transaction costs to rise. as Lester Telser's seminal article demonstrated, transaction costs tend to rise any time a firm is not able to capture all of the benefits created by its own conduct because the existence of such positive externalities gives other firms the Incentive to attempt to free ride on the benefits created by other firms For example, suppose that a firm manufactures a technically complicated product that requires significant presale services (such as the demonstration of the product). Telser argues that retailers will have the incentive to shirk in providing such services in the hopes that other retailers will bear the costs of providing such services. If all retailers respond to these incentives in the same way, the total amount of presale services will fall below efficient levels 98 A manufacturer facing the possibility of such free riding has two alternatives. It can contractually specify the level of presale services that each retailer is required to offer. Alternatively, it might attempt to rely on a vertical contractual restraint, such as resale price maintenance or exclusive sales territories to align the retailers' incentives with the manufacturers. 96 Klein et al., supra note 91, at 309-10 97 Lester G. Telser, Why Should Manufacturers Want Fair Trade?, 3 J. L (1960) Id. at 91-92. Although the problems associated with free riding and hold up bear similarities, they are in fact analytically distinct Free riding is a result of externalities and derives from the inability of each fim to internalize all of its costs and benefits. As a result, it is endemic to all must make a relationship-specific investment. The danger of opportunism does not appear until after this investment is made. As such, it is not endemic to the market itself, but rather is a product of a particular investment decision, which explains why the literature refers to the gains as"quasi-rents, " as opposed to true rents. In addition, since hold up does not depend upon any notion of externalities, it can occur even in markets with well-defined property rights 99 BORK, supra note 70, at 290-91; POSNER, supra note 69, at 148-50; Robert Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 75 YALE L.J. 373, 45 195
Vertical Integration and Media Regulation in the New Economy 195 markup for capital costs. While well-designed to protect Fisher Body against opportunistic behavior by GM, Klein, Crawford, and Alchian contend that the contract was not well-designed to protect GM against opportunistic behavior by Fisher Body. When the demand for metalbodied automobiles increased dramatically, Fisher Body was able to use its capital investments much more efficiently than the original contract had envisioned, and the existing formula allowed Fisher Body to charge GM prices that overcompensated it for its capital costs. In addition, Klein, Crawford, and Alchian argue that Fisher Body maximized its own profits by employing labor-intensive production methods that were technologically inefficient and by refusing to locate its plants near GM’s. Unable to manage its relationship with its input supplier through contractual devices, GM was left with no choice but to vertically integrate backwards into body fabrication by acquiring Fisher Body.96 Free Riding. Free riding represents another type of opportunistic behavior that can cause transaction costs to rise. As Lester Telser’s seminal article demonstrated, transaction costs tend to rise any time a firm is not able to capture all of the benefits created by its own conduct, because the existence of such positive externalities gives other firms the incentive to attempt to free ride on the benefits created by other firms.97 For example, suppose that a firm manufactures a technically complicated product that requires significant presale services (such as the demonstration of the product). Telser argues that retailers will have the incentive to shirk in providing such services in the hopes that other retailers will bear the costs of providing such services. If all retailers respond to these incentives in the same way, the total amount of presale services will fall below efficient levels.98 A manufacturer facing the possibility of such free riding has two alternatives. It can contractually specify the level of presale services that each retailer is required to offer. Alternatively, it might attempt to rely on a vertical contractual restraint, such as resale price maintenance or exclusive sales territories, to align the retailers’ incentives with the manufacturers’.99 96 Klein et al., supra note 91, at 309-10. 97 Lester G. Telser, Why Should Manufacturers Want Fair Trade?, 3 J.L. & ECON. 86 (1960). 98 Id. at 91-92. Although the problems associated with free riding and hold up bear many similarities, they are in fact analytically distinct. Free riding is a result of externalities and derives from the inability of each firm to internalize all of its costs and benefits. As a result, it is endemic to all markets without well-defined property rights. The possibility of hold up typically arises when a firm must make a relationship-specific investment. The danger of opportunism does not appear until after this investment is made. As such, it is not endemic to the market itself, but rather is a product of a particular investment decision, which explains why the literature refers to the gains as “quasi-rents,” as opposed to true rents. In addition, since hold up does not depend upon any notion of externalities, it can occur even in markets with well-defined property rights. 99 BORK, supra note 70, at 290-91; POSNER, supra note 69, at 148-50; Robert Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 75 YALE L.J. 373, 453-54
Yale Journal on Regulation Vol.19:171.2002 Such contracts can be quite expensive to negotiate and enforce ever and are inevitably incomplete. If the transaction costs become sufficiently large, a manufacturer might instead choose to obviate the entire problem by vertically integrating into distribution Adverse Selection. The third example of opportunistic behavior is known in the literature as adverse selection In the context of manufacturing and distribution, it typically arises when products are non homogeneous and the manufacturer is unable to determine the value of its products easily. Customers facing such a situation have the incentive to expend a great deal of costs searching through the goods in an attempt to find the goods that are relatively underpriced. The seller will in turn have the incentive to expend additional funds sorting its goods, in order to avoid being left with an inventory comprised solely of below-average goods These difficulties in determining product quality can thus lead to wasteful expenditure of resources, which Roy Kenney and Benjamin Klein call overarching”100 The parties can avoid these costs, however, either by vertically integrating or by agreeing to a vertical contractual constraint, such as a long-term exclusive dealing arrangement, that functionally serves the same purposes. In addition, Kenney and Klein suggest that a manufacturer may mitigate oversearching by selling its goods in bundles. The logic is that bundling goods directs the parties'attention away from the value of individual items, which is information that is extremely expensive to obtain, and instead focuses attention on the average value of the entire bundle, which is information that that can be gleaned more cheaply Bundling, therefore, can reduce transaction costs by decreasing the parties incentives to expend additional effort in sorting through the goods since on average, the overpriced and underpriced goods in the bundle tend to balance each other out 102 Tak As Kenney and Klein point out, bundling of goods is quite common ke, for example, the supermarkets' common practice of selling groups of potatoes in opaque plastic bags. If the supermarket were to offer a bin potatoes for individual sale at a specified price, purchasers would have the incentive to sort through the bin to find the best potatoes (i.e, potatoes that are underpriced, in that their value exceeds the average value of the bin) (1966)(hereinafter Bork, Rule of Reason]: Robert H. Bork, Vertical Restraints: Sc 1977 SUP. CT. REV. 171, 180-81 hereinafter Bork, Vertical Restraints]: Frank Vertical Arrangements and the Rule of Reason, 53 ANTITRUST L.J. 135, 148 Posner, Antitrust Policy and the Supr Merger and Potential Competition Decisions, 75 COLUM. L REV. 282, 283-85(1975) 100 Roy w. Kenney Benjamin Klein, The Economics of Block Booking, 26 J.L. & ECoN 497,503-04(1983 101 See supra note 24 and accompanying text. 102 See Kenney Klein, supra note 100, at 505
Yale Journal on Regulation Vol. 19:171, 2002 196 Such contracts can be quite expensive to negotiate and enforce, however, and are inevitably incomplete. If the transaction costs become sufficiently large, a manufacturer might instead choose to obviate the entire problem by vertically integrating into distribution. Adverse Selection. The third example of opportunistic behavior is known in the literature as “adverse selection.” In the context of manufacturing and distribution, it typically arises when products are nonhomogeneous and the manufacturer is unable to determine the value of its products easily. Customers facing such a situation have the incentive to expend a great deal of costs searching through the goods in an attempt to find the goods that are relatively underpriced. The seller will in turn have the incentive to expend additional funds sorting its goods, in order to avoid being left with an inventory comprised solely of below-average goods. These difficulties in determining product quality can thus lead to wasteful expenditure of resources, which Roy Kenney and Benjamin Klein call “oversearching.”100 The parties can avoid these costs, however, either by vertically integrating or by agreeing to a vertical contractual constraint, such as a long-term exclusive dealing arrangement, that functionally serves the same purposes.101 In addition, Kenney and Klein suggest that a manufacturer may mitigate oversearching by selling its goods in bundles. The logic is that bundling goods directs the parties’ attention away from the value of individual items, which is information that is extremely expensive to obtain, and instead focuses attention on the average value of the entire bundle, which is information that that can be gleaned more cheaply. Bundling, therefore, can reduce transaction costs by decreasing the parties’ incentives to expend additional effort in sorting through the goods since, on average, the overpriced and underpriced goods in the bundle tend to balance each other out.102 As Kenney and Klein point out, bundling of goods is quite common. Take, for example, the supermarkets’ common practice of selling groups of potatoes in opaque plastic bags. If the supermarket were to offer a bin of potatoes for individual sale at a specified price, purchasers would have the incentive to sort through the bin to find the best potatoes (i.e., potatoes that are underpriced, in that their value exceeds the average value of the bin). (1966) [hereinafter Bork, Rule of Reason]; Robert H. Bork, Vertical Restraints: Schwinn Overruled, 1977 SUP. CT. REV. 171, 180-81 [hereinafter Bork, Vertical Restraints]; Frank H. Easterbrook, Vertical Arrangements and the Rule of Reason, 53 ANTITRUST L.J. 135, 148-50 (1984); Richard A. Posner, Antitrust Policy and the Supreme Court: An Analysis of the Restricted Distribution, Horizontal Merger and Potential Competition Decisions, 75 COLUM. L. REV. 282, 283-85 (1975). 100 Roy W. Kenney & Benjamin Klein, The Economics of Block Booking, 26 J.L. & ECON. 497, 503-04 (1983). 101 See supra note 24 and accompanying text. 102 See Kenney & Klein, supra note 100, at 505
Vertical Integration and Media Regulation in the New Economy The initial purchasers who find such potatoes receive a windfall. Later purchasers will find a bin composed entirely of potatoes that are worth less than the average price of the bin. a seller who wishes id being left with a bin full of low-quality goods can either charge less than the average price or can attempt to sort the potatoes in advance and price them appropriately. Such efforts are costly. Furthermore, additional sorting is unlikely to eliminate this problem, since even if potatoes of different grades are placed into separate bins, the same effect will occur within each bin, albeit on a smaller scale. Prepackaging the potatoes into preset bundles may deal with this problem more effectively, since doing so reduces the incentives to oversearch by making information about quality harder to determine and by refocusing purchasers' attention towards the rage quality of the Kenney and Klein also used examples directly relevant to media markets to illustrate their point. The one that has garnered the most attention is their discussion of the movie studios' practice of"block booking, which was struck down by the Supreme Court in United States theaters fre licensing individual films and instead required them to purchase packages of films arranged by the studio According to Kenney and Klein, block booking served two distinct purposes. First, it reduced the costs of distributing first-run movies. The practice stems in large part from the difficulty in determining the true value of a movie at the time it is initially licensed. The complexities of scheduling theaters generally required that licensing agreements be signed before the film was produced. Even when that was not the case, advance screenings did not yield much useful information, since consumer response to particular films remained unpredictable. According to Kenney and Klein, Paramount used block booking to reduce the transaction costs of distributing first-run movies by allowing the movie studios to lower the expenses associated with scheduling movies for release. 06 Second, block booking solved adverse selection problems in the market for second-run films. A movie's initial run, of course, tended to reveal a movies real value. Armed with knowledge that was unavailable heaters have the incentive to accept only those films own ex post to be underpriced (i.e, whose value exceeds the value of the average film) and to reject or shorten the run of those films known ex post to be overpriced (i.e, whose falls below the value of the average film). Kenney and Klein argued that block booking could 103 See id at 515 4334U.S.131(1948) 105 See Kenney& Klein, supra note 100, at 518, 520-21 106 Id at 52
Vertical Integration and Media Regulation in the New Economy 197 The initial purchasers who find such potatoes receive a windfall. Later purchasers will find a bin composed entirely of potatoes that are worth less than the average price of the bin. A seller who wishes to avoid being left with a bin full of low-quality goods can either charge less than the average price or can attempt to sort the potatoes in advance and price them appropriately. Such efforts are costly. Furthermore, additional sorting is unlikely to eliminate this problem, since even if potatoes of different grades are placed into separate bins, the same effect will occur within each bin, albeit on a smaller scale. Prepackaging the potatoes into preset bundles may deal with this problem more effectively, since doing so reduces the incentives to oversearch by making information about quality harder to determine and by refocusing purchasers’ attention towards the average quality of the goods.103 Kenney and Klein also used examples directly relevant to media markets to illustrate their point. The one that has garnered the most attention is their discussion of the movie studios’ practice of “block booking,” which was struck down by the Supreme Court in United States v. Paramount Pictures, Inc. 104 This practice prevented movie theaters from licensing individual films and instead required them to purchase packages of films arranged by the studio. According to Kenney and Klein, block booking served two distinct purposes. First, it reduced the costs of distributing first-run movies. The practice stems in large part from the difficulty in determining the true value of a movie at the time it is initially licensed. The complexities of scheduling theaters generally required that licensing agreements be signed before the film was produced. Even when that was not the case, advance screenings did not yield much useful information, since consumer response to particular films remained unpredictable.105 According to Kenney and Klein, Paramount used block booking to reduce the transaction costs of distributing first-run movies by allowing the movie studios to lower the expenses associated with scheduling movies for release.106 Second, block booking solved adverse selection problems in the market for second-run films. A movie’s initial run, of course, tended to reveal a movie’s real value. Armed with knowledge that was unavailable ex ante, movie theaters have the incentive to accept only those films known ex post to be underpriced (i.e., whose value exceeds the value of the average film) and to reject or shorten the run of those films known ex post to be overpriced (i.e., whose value falls below the value of the average film). Kenney and Klein argued that block booking could 103 See id. at 515. 104 334 U.S. 131 (1948). 105 See Kenney & Klein, supra note 100, at 518, 520-21. 106 Id. at 521
Yale Journal on Regulation Vol.19:171.2002 eliminate these incentives by preventing theater owners from opportunistically attempting to renegotiate deals based on the new information and by redirecting the focus of both parties to the average price. If block booking contracts become subject to renegotiation or too expensive to enforce, firms may find it preferable to vertically integrate into distribution he Empirical Evidence on Transaction Costs. The transaction cost approach pioneered by the Chicago School was thus able to offer a number of theoretical explanations of why vertical integration might enhance efficiency and was able to identify several specific examples that appeared ing however, does nothing to establish whether something is likely. As a result, economists have conducted extensive empirical studies in an attempt to determine whether and how frequently such transaction cost efficiencies actually exist. Although many of these results are promising, they are not sufficient to establish whether vertical integration actually produces the transaction cost efficiencies described in the theoretical literature Other studies challenged the historical examples upon which the proponents of particular theories of transaction cost efficiencies have based their claims. For example, a number of distinguished scholars including Ronald Coase himself, have challenged the Klein-Crawford Alchian account of Fisher Body. These critics argue that vertical contractual restraints were more than sufficient to protect GMs interests and point out that at the time that Fisher Body supposedly acted opportunistically, GM already owned sixty percent of Fisher Bodys common stock. Klein, in turn, responded by arguing that the relevant quasi-rents resulted from firm-specific human (rather than physical capital and by placing greater emphasis on Fisher Bodys supposed refusal to locate its plants near GMs 107ldat521-23 108 For surveys of the empirical literature on transaction costs and vertical integration, se Keith J. Crocker Scott E. Masten, Regulation and Administered Contracts Revisi EcoN. ORG. 95, 107-11(1988), Perry, supra note 72, at 215-19, Aric Rindfleisch Jan B. Heide, Transaction Cost Analysis: Past, Present, and Future Applications, 61 J. MARKETING 30, 32-39 (1997); and Howard A. Shelanski Peter G. Klein, Empirical Research in Transaction Cost Economics: A Review and Assessment, 11 J. L ECoN. ORG. 334, 349-50(1995 Ramon Casadesus-Masanell Daniel F. Spulber, The Fable of Fisher Body, 43 J.L.& EcoN. 67(2000)R H. Coase, The Acquisition of Fisher Body by General Motors, 43 J. L. ECoN 15(2000)R H Coase, The Nature of the Firm: Meaning, 4 J. L ECoN. ORG 19, 30-3 isher Body Revisited. J.L.&ECON.33(2000) nin Klein, Vertical Integration as Organiational Ownership: The Fisher Body- General Motors Relationship Revisited, 4 J. L ECoN. ORG 199, 204-08(1988) 111 Benjamin Klein, Fisher-General Motors and the Nature of the Firm, 43 J. L.& ECoN 198
Yale Journal on Regulation Vol. 19:171, 2002 198 eliminate these incentives by preventing theater owners from opportunistically attempting to renegotiate deals based on the new information and by redirecting the focus of both parties to the average price.107 If block booking contracts become subject to renegotiation or too expensive to enforce, firms may find it preferable to vertically integrate into distribution. The Empirical Evidence on Transaction Costs. The transaction cost approach pioneered by the Chicago School was thus able to offer a number of theoretical explanations of why vertical integration might enhance efficiency and was able to identify several specific examples that appeared to confirm these theories. Establishing that something is possible, however, does nothing to establish whether something is likely. As a result, economists have conducted extensive empirical studies in an attempt to determine whether and how frequently such transaction cost efficiencies actually exist.108 Although many of these results are promising, they are not sufficient to establish whether vertical integration actually produces the transaction cost efficiencies described in the theoretical literature. Other studies challenged the historical examples upon which the proponents of particular theories of transaction cost efficiencies have based their claims. For example, a number of distinguished scholars, including Ronald Coase himself, have challenged the Klein-CrawfordAlchian account of Fisher Body. These critics argue that vertical contractual restraints were more than sufficient to protect GM’s interests and point out that at the time that Fisher Body supposedly acted opportunistically, GM already owned sixty percent of Fisher Body’s common stock.109 Klein, in turn, responded by arguing that the relevant quasi-rents resulted from firm-specific human (rather than physical) capital110 and by placing greater emphasis on Fisher Body’s supposed refusal to locate its plants near GM’s.111 107 Id. at 521-23. 108 For surveys of the empirical literature on transaction costs and vertical integration, see Keith J. Crocker & Scott E. Masten, Regulation and Administered Contracts Revisited: Lessons from Transaction-Cost Economics for Public Utility Regulation, 9 J. REG. ECON. 5, 14-15 (1996); Paul L. Joskow, Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence, 4 J.L. ECON. & ORG. 95, 107-11 (1988); Perry, supra note 72, at 215-19; Aric Rindfleisch & Jan B. Heide, Transaction Cost Analysis: Past, Present, and Future Applications, 61 J. MARKETING 30, 32-39 (1997); and Howard A. Shelanski & Peter G. Klein, Empirical Research in Transaction Cost Economics: A Review and Assessment, 11 J.L. ECON. & ORG. 334, 349-50 (1995). 109 See generally Ramon Casadesus-Masanell & Daniel F. Spulber, The Fable of Fisher Body, 43 J.L. & ECON. 67 (2000); R.H. Coase, The Acquisition of Fisher Body by General Motors, 43 J.L. & ECON. 15 (2000); R.H. Coase, The Nature of the Firm: Meaning, 4 J.L. ECON. & ORG. 19, 30-31 (1988); Robert F. Freeland, Creating Holdup Through Vertical Integration: Fisher Body Revisited, 43 J.L. & ECON. 33 (2000). 110 Benjamin Klein, Vertical Integration as Organizational Ownership: The Fisher BodyGeneral Motors Relationship Revisited, 4 J.L. ECON. & ORG. 199, 204-08 (1988). 111 Benjamin Klein, Fisher-General Motors and the Nature of the Firm, 43 J.L. & ECON. 105 (2000)
Vertical Integration and Media Regulation in the New Economy Another set of commentators has challenged Kenney and Kleins account of the Paramount case. Block booking can only reduce transaction costs if the licensing agreement prevents theater owners from renegotiating the terms of the contract after the true value of the films has been revealed Andrew Hanssen effectively undercut Kenney and Kleins analysis by demonstrating that the typical block booking contract permitted theater owners to reject a significant number of second-run films and that the movie studios often did not force theater owners to fulfill all of their block booking obligations. Kenney and Klein, in turn, responded with an alternative account of the Paramount case. According to this new account, the parties relied on self enforcement, regulated by the mutual need to preserve reputational capital, rather than the provisions of the contract to protect themselves against opportunistic behavior. The real purpose of the contract was to provide a safety net to guard against the failure of such self enforcement. As a result, Kenney and Klein argued that it is not surprising that the parties occasionally deviated from the strict contract terms. 3 q It appears that the critics have gained the upper hand in these debates development made important because of the manner in which the proponents of the various efficiency theories relied upon the specific examples they cited as the primary support for their plausibility. These empirical disputes cannot completely resolve these issues though subsequent work has called the specific examples cited into question empirical matter, the falsification of these particular examples does not necessarily invalidate these proposals as a theoretical matter. As Timothy Muris, the recently appointed Chairman of the FtC has observed, the principal empirical questions surrounding the transaction cost implications of vertical integration and vertical restraints have yet to be resolved. 114 It would, however, be a mistake to suggest that the unavailability of definitive empirical proof of the existence of such efficiencies renders the 1 12 F. Andrew Hanssen, The Block Booking of Films Reexamined, 43 J. L. ECoN. 395 113 Roy w. Kenney Benjamin Klein, How Block Booking Facilitated Self-Enforcing Film Contracts,43JL.&ECON.427,430-32(2000 1 14 Timothy J. Muris, GTE Sylvania and the Empirical Foundations of Antitrust, 68 ANTITRUST LJ. 899, 910-11 (2001), see also Eddie Correia, Antitrust Policy After the Reagan Administration, 76 GEO. LJ. 329, 331(1987)(noting that the empirical evidence for"the mos fundamental assumptions" underlying economic policy are"often very thin"); william H. Page, The Chicago School and the Evolution of Antitrust: Characterization, Antitrust Injury, and Evidentiar afficiency, 75 VALREV. 1221, 1242 (1989)(observing that Chicago School studies "do not resolve many of the most basic empirical questions associated with the policy choices that the [chicago models pose"); id. at 1252(noting that"[t he state of empirical research"on resale price maintenance is inadequate to resolve the dispute"). These issues are rendered even murkier by the argument that even when opportunism emerges as a real problem, the parties might look to governmental regulation to ensure that the various parties do not take advantage of one another. See victor P. Goldberg Regulation and Administered Contracts, 7 BELL J ECON. 426(1976)
Vertical Integration and Media Regulation in the New Economy 199 Another set of commentators has challenged Kenney and Klein’s account of the Paramount case. Block booking can only reduce transaction costs if the licensing agreement prevents theater owners from renegotiating the terms of the contract after the true value of the films has been revealed. Andrew Hanssen effectively undercut Kenney and Klein’s analysis by demonstrating that the typical block booking contract permitted theater owners to reject a significant number of second-run films and that the movie studios often did not force theater owners to fulfill all of their block booking obligations.112 Kenney and Klein, in turn, responded with an alternative account of the Paramount case. According to this new account, the parties relied on self enforcement, regulated by the mutual need to preserve reputational capital, rather than the provisions of the contract to protect themselves against opportunistic behavior. The real purpose of the contract was to provide a safety net to guard against the failure of such self enforcement. As a result, Kenney and Klein argued that it is not surprising that the parties occasionally deviated from the strict contract terms.113 It appears that the critics have gained the upper hand in these debates, a development made important because of the manner in which the proponents of the various efficiency theories relied upon the specific examples they cited as the primary support for their plausibility. These empirical disputes cannot completely resolve these issues, however. Even though subsequent work has called the specific examples cited into question as an empirical matter, the falsification of these particular examples does not necessarily invalidate these proposals as a theoretical matter. As Timothy Muris, the recently appointed Chairman of the FTC, has observed, the principal empirical questions surrounding the transaction cost implications of vertical integration and vertical restraints have yet to be resolved.114 It would, however, be a mistake to suggest that the unavailability of definitive empirical proof of the existence of such efficiencies renders the 112 F. Andrew Hanssen, The Block Booking of Films Reexamined, 43 J.L. & ECON. 395 (2000). 113 Roy W. Kenney & Benjamin Klein, How Block Booking Facilitated Self-Enforcing Film Contracts, 43 J.L. & ECON. 427, 430-32 (2000). 114 Timothy J. Muris, GTE Sylvania and the Empirical Foundations of Antitrust, 68 ANTITRUST L.J. 899, 910-11 (2001); see also Eddie Correia, Antitrust Policy After the Reagan Administration, 76 GEO. L.J. 329, 331 (1987) (noting that the empirical evidence for “the most fundamental assumptions” underlying economic policy are “often very thin”); William H. Page, The Chicago School and the Evolution of Antitrust: Characterization, Antitrust Injury, and Evidentiary Sufficiency, 75 VA. L. REV. 1221, 1242 (1989) (observing that Chicago School studies “do not resolve many of the most basic empirical questions associated with the policy choices that the [Chicago] models pose”); id. at 1252 (noting that “[t]he state of empirical research” on resale price maintenance “is inadequate to resolve the dispute”). These issues are rendered even murkier by the argument that even when opportunism emerges as a real problem, the parties might look to governmental regulation to ensure that the various parties do not take advantage of one another. See Victor P. Goldberg, Regulation and Administered Contracts, 7 BELL J. ECON. 426 (1976)