32
In fact, as we’ll see, the Commission’s hypothesis that
paid prioritization has deleterious effects seems not to rest on
any evidence or analysis. Further, the Order fails to address
critiques and alternatives.
I look first to the support offered by the Commission for
its claim. The Order asserts that “[t]he Commission’s
conclusion [that allowance of paid prioritization would
disadvantage certain types of edge providers] is supported by
a well-established body of economic literature, including
Commission staff working papers.” Order ¶ 126. This claim
is, to put it simply, false. The Commission points to four
economics articles, none of which supports the conclusion that
all distinctions in rates, even when based on differentials in
service, will reduce the aggregate welfare afforded by a set of
economic transactions.4 Indeed, the Commission plainly
didn’t look at the articles. None of them even addresses price
distinctions calibrated to variations in quality of service;
rather they are devoted to the sort of price differences
addressed by the Robinson-Patman Act, 15 U.S.C. § 13,
targeting sellers who sell the same good of the same quality at
different prices. Three say that in some circumstances rules
against price differentials can be beneficial (to repeat, the
articles speak of rules against differentials not related to
4
Michael L. Katz, Price Discrimination and Monopolistic
Competition, 52 ECONOMETRICA 1453, 1453-71 (1984) (“Price
Discrimination”); Michael L. Katz, Non-Uniform Pricing, Output
and Welfare under Monopoly, 50 REV. ECON. STUD. 37, 37-56
(1983) (“Output and Welfare”); Michael L. Katz, The Welfare
Effects of Third-Degree Price Discrimination in Intermediate Good
Markets, 77 AM. ECON. REV. 154, 154-167 (1987); Yoshihiro
Yoshida, Third Degree Price Discrimination in Input Markets:
Output and Welfare, 90 AM. ECON. REV. 240, 240-246 (2000)
(“Third Degree Price Discrimination”).
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