And although many economists, looking at Williamson’s work, don’t cite his 1968 article on antitrust as their favorite, it’s mine. Here’s the key paragraph in the bio:
In his classic 1968 article, “Economies as an Antitrust Defense,” Williamson showed that horizontal mergers of companies in the same industry, even those that increase market power and even those where the increase in market power leads to a higher price, can create efficiency. The reason is that if mergers reduce costs, the reduction in costs can create more gains for the economy than the losses to consumers from the higher price. With an elasticity of demand of two, for example, even a one-quarter percent reduction in costs would cause more gains for the firm than the consumer losses from a five-percent increase in price. For such a merger, therefore, society, which, after all, includes consumers and producers, would benefit. For lower elasticities of demand, the required decrease in cost for the merger to be efficient is even lower than one quarter of a percent.
I met Williamson at a two-day event that the UCLA economics department put on in 2012 to appreciate Harold Demsetz. Such events when the person’s alive always have made more sense to me than when the person is dead. Ollie and I shared a cab (remember those?) from the hotel to UCLA and we had a nice conversation. He seemed like a modest, but still very smart, guy. Very classy.
Many of us had thought that a good way to give a Nobel Prize to Harold was to combine it with the prize given to Elinor Ostrom and Oliver Williamson in 2009. Somehow that issue came up at the event and Harold, speaking from the floor, said to Oliver, “Just in case there’s any doubt, you deserved the prize.” Oliver gracefully acknowledged.