When should the discipline of economics be left to the economists?

A plaintiff-dealer sought damages from a manufacturer on the grounds of price discrimination, claiming that the manufacturer sold inventory at discriminatory prices to dealers. The plaintiff’s expert was a computer scientist with no economics or statistics background.

The plaintiff had to prove, among other things, that his dealership paid higher prices for inventory than other dealers and that this caused measurable lost profits. The expert’s evidence was a listing of plaintiff products purchased at prices greater than the lowest price paid by any other dealer, adjusted for make, model, and options. The underlying theory of this method was that all dealers were “due” the minimum price ever paid for a product.

A proper analysis of prices demonstrated that there were numerous economic factors that caused dealer prices to differ besides the few that the plaintiff’s expert was willing to consider. Among local markets in which competitive branded dealers resided, the manufacturer’s prices to its dealers were lower. The manufacturer’s lower prices reflected competitive necessity.

Additionally, the plaintiff’s expert claimed that the retail markets for these products were highly competitive. This argument necessarily implies that reductions in the manufacturer’s prices to a dealer would have been passed on to the customer and not retained in the form of dealer profits. The computer scientist failed to understand the logical implications of his own arguments and failed to examine the effects of competitive market forces on dealer prices.