Baxter's Law


Baxter's Law

Baxter's law (also known as the Bell Doctrine) is a law of economics that describes how a monopoly in a regulated industry can extend into, and dominate, a non-regulated industry. It is named after law professor
William Francis Baxter Jr.

A monopolist in a regulated industry may face a price cap, or a rate of return type pricing scheme. If this regulated industry serves as an input for another industry which is unregulated, the monopolist may wish to expand into this unregulated industry in order to increase overall profits.

An economic theory referred to as ICE (internalizing complimentary externalities) suggests that when a monopolist seeks to expand their monopoly into other market levels, such an expansion is pro-competitive, because there is no reason for a monopolist to expand into an upstream or downstream market unless they are more efficient than competitors. See Joseph Farrell & Philip J. Weiser, Modularity, Vertical Integration, and Open Access Policies: Towards a Convergence of Antitrust and Regulation in the Internet Age, 17 Harv. J. Law & Tec. 85, 100-105 (2005). This is because in a multi-level market, customers only gain a single final product, and are willing to pay only one "monopoly price" for this good. If a monopolist already owns one level of the market, then they can extract the entire monopoly price by increasing the prices on their level, and expanding into other levels of the market is unnecessary since they are already getting the entire monopoly prices.

Baxter's Law is an exception to the ICE theory. Under Baxter's law, a monopolist in a regulated industry is unable to capture the entire monopoly price since their prices are regulated. This monopolist will then seek to use its monopoly on one level of the market to expand into another level of the market, one where price is unregulated. Whereas the ICE theory would normally find this acceptable, Baxter's Law explains that the monopolist can use its monopoly position in one level to capture a monopoly in another level, and then capture the monopoly price in this other level of the market. While normal monopolists would suffer losses in their first monopoly level that would offset the gains in the new market level, a regulated monopolist will suffer smaller losses in their first monopoly level due to price regulation, but will still have full gains in the market level, and therefore will seek to expand their monopoly. Joseph Farrell & Philip J. Weiser, Modularity, Vertical Integration, and Open Access Policies: Towards a Convergence of Antitrust and Regulation in the Internet Age, 17 Harv. J. Law & Tec. 85, 105-107 (2005).


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Baxter v. Montana — Baxter, et al., v. Montana, et al. [[File: |100px]] Montana Supreme Court Argued September 2, 2009 Decided December 31, 2009 Full case name: Robert Baxter, Stephen Speckart, M.D …   Wikipedia

  • Baxter — The name Baxter has several meanings. All originated from the surname Baxter meaning female baker , originally a Scottish and East Anglian name. The Baxter family is traditionally a sept of Clan MacMillan. People Surnames A* Al Baxter, Australian …   Wikipedia

  • Baxter v. United States — William E. Baxter Jr. v. United States was a federal tax refund case, decided in 1986, regarding the U.S. federal income tax treatment of the gambling income of a professional gambler. Because of this case, gambling winnings in the United States… …   Wikipedia

  • Baxter Protests — During the Easter weekends of 2003 and 2005 several hundred protesters went to the Baxter Immigration Reception and Processing Centre, located near Port Augusta to protest against the Howard Governments treatment of asylum seekers.The protests… …   Wikipedia

  • William Baxter (law professor) — William Francis Baxter, Jr., (July 13, 1929 ndash; November 27, 1998) was a law professor at Stanford University. His specialty was antitrust law.Antitrust LawAs Assistant Attorney General in charge of the Antitrust Division of the United States… …   Wikipedia

  • List of law clerks of the Supreme Court of the United States — Law clerks have assisted Supreme Court Justices in various capacities since the first one was hired by Justice Horace Gray in the 1880s. By the traditions and rules that have developed around this procedure today Associate Justices on the Supreme …   Wikipedia

  • List of law clerks of the Supreme Court of the United States (Seat 1) — Law clerks have assisted Supreme Court Justices in various capacities since the first one was hired by Justice Horace Gray in the 1880s. By the traditions and rules that have developed around this procedure today Associate Justices on the Supreme …   Wikipedia

  • List of law clerks of the Supreme Court of the United States (Seat 6) — Law clerks have assisted Supreme Court Justices in various capacities since the first one was hired by Justice Horace Gray in the 1880s. By the traditions and rules that have developed around this procedure today Associate Justices on the Supreme …   Wikipedia

  • Jesse Hubbard and Angie Baxter — Jesse and Angie Hubbard (Darnell Williams and Debbi Morgan) are daytime TV s first African American supercouple. Jesse Hubbard and Angela Angie Baxter Hubbard are fictional characters and a supercouple from the ABC daytime drama All My Children.… …   Wikipedia

  • Richard Baxter — (November 12, 1615 December 8, 1691) was an English Puritan church leader, theologian and controversialist, called by Dean Stanley the chief of English Protestant Schoolmen .Early life and educationBaxter was born at Rowton, in Shropshire, at the …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.