Ever walk down a grocery aisle and wonder why the "store brand" milk is sitting right next to the name-brand stuff, but costs three dollars less? Or why a massive company can slash prices until its competitors go belly-up without the government immediately stepping in?
If you've thought about these things, you're actually thinking about the life's work of David E. Mills.
David E. Mills isn't just another name in a dusty academic journal. For decades at the University of Virginia (UVA), he’s been the guy pulling back the curtain on how markets actually behave when things get messy. We’re talking industrial organization, antitrust law, and the weird logic of urban sprawl.
Honestly, the way he looks at economics is kinda refreshing. It’s not just abstract math. It's about the "why" behind the stuff we see every day.
The UVA Legacy and the Elzinga Connection
You can't really talk about David E. Mills without mentioning Kenneth G. Elzinga.
They are like the Jordan and Pippen of antitrust economics. If you were a student at UVA anytime in the last forty years, you probably felt their influence. They didn’t just teach; they shaped the way the legal system views "predatory pricing."
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One of their big hits was a paper on the Lerner Index.
Now, don't let the name bore you. Basically, it’s a way to measure how much "monopoly power" a firm really has. Most people think a big company is automatically a monopoly. Mills and Elzinga argued it’s more complicated than that.
Why the "Store Brand" is a Strategic Weapon
Remember that milk example? Mills wrote a fascinatng paper called Why Retailers Sell Private Labels.
Before him, people thought store brands were just cheap alternatives for people trying to save a buck. Mills showed they are actually a strategic tool.
- They give retailers leverage over big manufacturers (like Nestlé or Kraft).
- They help segment the market.
- They actually change the bargaining power in the entire supply chain.
It’s a chess move, not just a bargain.
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The Truth About Predatory Pricing
There’s this huge debate in economics: can a big company "predate" on a smaller one?
Basically, the idea is that a giant drops their prices so low that the little guy goes bankrupt. Then, once the competition is dead, the giant jacks the prices back up.
Mills and Elzinga were skeptical. They often sided with the "Chicago School" view—the idea that predatory pricing is actually super rare because it’s so expensive for the giant to pull off. Think about it. You’re losing money on every sale just to maybe kill a competitor who might just be replaced by another one next year.
It’s a risky bet.
Their work, especially Antitrust Predation and The Antitrust Paradox, really pushed the courts to demand real evidence of harm before punishing a company for low prices. Because, hey, low prices are usually good for us, right?
Urban Sprawl and the Timing of Development
Mills also had this whole other life in urban economics. He looked at why cities grow the way they do.
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Why does a developer leave a lot empty for ten years while everything around it gets built up? Most people call it "eyesore" or "waste." Mills called it timing.
He looked at how market power and land use regulations (like zoning) affect when and where things get built. He wasn't afraid to point out that sometimes, zoning is a "negative-sum game." That means the rules we make to "protect" neighborhoods sometimes just make everyone poorer in the long run.
What Most People Get Wrong
People often think David E. Mills is just a "pro-business" economist. That’s a total misunderstanding.
He’s a pro-market economist. There’s a difference.
Being pro-market means you want the rules to be clear so that competition can actually happen. It’s about efficiency. If a big firm is efficient, let them be big. If they’re just using legal loopholes to crush rivals, that’s where the trouble starts.
He’s spent a lot of time looking at Demand Fluctuations.
Basically, how do firms stay flexible when the world is unpredictable? His research suggests that being "different" is a survival strategy. In an oligopoly (where only a few firms rule), if everyone does the exact same thing, they all die when the market shifts.
The firms that survive are the ones that find a niche.
Actionable Insights from the Mills Approach
So, what can we actually take away from the David E. Mills school of thought?
- Don't Fear the Giant, Fear the Barrier: A large company isn't the problem; it's when that company makes it impossible for anyone else to start a business.
- Watch the "Middleman": In the modern economy, retailers (like Amazon or Walmart) have as much power as the people making the products. Their "private labels" are a signal of who really holds the cards.
- Timing is an Asset: Whether you're investing in real estate or a new tech startup, the "when" is often more important than the "what."
- Evidence Over Emotion: In antitrust (and in life), don't assume someone is a villain just because they're winning. Look at the data. Are consumers actually getting hurt?
If you're looking to understand the modern economy, you've gotta look at the foundations. Mills built a lot of those foundations. Even in 2026, as we deal with AI monopolies and global supply chain shifts, his work on firm flexibility and market power is still the playbook.
To dig deeper, start by looking at his work on Vertical Restraints. It sounds technical, but it’s essentially the rulebook for how manufacturers and stores are allowed to talk to each other. Understanding that will change how you see every purchase you make.
Practical Next Steps:
- Review the Lerner Index formula ($L = (P - MC) / P$) to understand how economists actually calculate market power in real-world antitrust cases.
- Compare the pricing strategies of national brands vs. store brands during your next grocery trip to see Mills' "Private Label" theory in action.
- Examine the Supreme Court's Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. decision, which reflects much of the skepticism toward predatory pricing that Mills and Elzinga championed.