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Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence

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  • Robert W. Crandall
  • Clifford Winston

Abstract

This paper reviews the literature and assesses the effects of antitrust policy and enforcement on consumer welfare. We find no evidence that antitrust policy in the areas of monopolization, collusion, and mergers has provided much benefit to consumers and, in some instances, we find evidence that it may have lowered consumer welfare. We also do not find any evidence that antitrust policy has deterred firms from engaging in actions that could harm consumers. We identify various reasons for the apparent ineffectiveness of antitrust policy, offer preliminary policy recommendations, and suggest ways in which economists could more fully assess antitrust policy.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/089533003772034871
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 17 (2003)
Issue (Month): 4 (Fall)
Pages: 3-26

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Handle: RePEc:aea:jecper:v:17:y:2003:i:4:p:3-26

Note: DOI: 10.1257/089533003772034871
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  1. Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-49, April.
  2. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Food Marketing Policy Center Research Reports 037, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  3. Burns, Malcolm R, 1977. "The Competitive Effects of Trust-Busting: A Portfolio Analysis," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 717-39, August.
  4. Caroline M. Hoxby, 2000. "Benevolent Colluders? The Effects of Antitrust Action on College Financial Aid and Tuition," NBER Working Papers 7754, National Bureau of Economic Research, Inc.
  5. Newmark, Craig M, 1988. "Does Horizontal Price Fixing Raise Price? A Look at the Bakers of Washington Case," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 469-84, October.
  6. Schumann, Laurence & Reitzes, James D & Rogers, Robert P, 1997. "In the Matter of Weyerhaeuser Company: The Use of a Hold-Separate Order in a Merger with Horizontal and Vertical Effects," Journal of Regulatory Economics, Springer, vol. 11(3), pages 271-89, May.
  7. Baker, Jonathan B & Baresnahan, Timothy F, 1985. "The Gains from Merger or Collusion in Product-differentiated Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 427-44, June.
  8. Ippolito, Pauline M & Overstreet, Thomas R, Jr, 1996. "Resale Price Maintenance: An Economic Assessment of the Federal Trade Commission's Case against the Corning Glass Works," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 285-328, April.
  9. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
  10. Eckbo, B Espen, 1992. " Mergers and the Value of Antitrust Deterrence," Journal of Finance, American Finance Association, vol. 47(3), pages 1005-29, July.
  11. Lawrence J. White, 2002. "Trends in Aggregate Concentration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 137-160, Fall.
  12. Pittman, Russell W, 1990. "Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 25-46, September.
  13. Dennis W. Carlton & Gustavo E. Bamberger & Roy J. Epstein, 1995. "Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?," NBER Working Papers 4998, National Bureau of Economic Research, Inc.
  14. Baker, Jonathan B & Rubinfeld, Daniel L, 1999. "Empirical Methods in Antitrust Litigation: Review and Critique," American Law and Economics Review, Oxford University Press, vol. 1(1-2), pages 386-435, Fall.
  15. Sproul, Michael F, 1993. "Antitrust and Prices," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 741-54, August.
  16. William Comanor & F. M. Scherer, 1995. "Rewriting History: the Early Sherman Act Monopolization Cases," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(2), pages 263-290.
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