Shapiro and Kaplow on “Antitrust”
Papers by Shapiro or Kaplow are by definition high up on my reading list, and one that’s (i) written by both with (ii) a narrow title such as “Antitrust” gets bumped up to the top spot pretty effortlessly. According to the abstract:
This is a survey of the economic principles that underlie antitrust law and how those principles relate to competition policy. We address four core subject areas: market power, collusion, mergers between competitors, and monopolization. In each area, we select the most relevant portions of current economic knowledge and use that knowledge to critically assess central features of antitrust policy. Our objective is to foster the improvement of legal regimes and also to identify topics where further analytical and empirical exploration would be useful.As one would expect, the treatment is concise, moderately formal, with a great deal of attention paid to differences between legal and economic approaches (Kaplow’s hand, no doubt) and the influence of lock ins, disruptive innovation, etc.
My only issue (as always) is that the article pays little attention to the ideological underpinnings of antitrust and the normative distributive commitments that are part and parcel of economic theory. (I addressed some of those issues here and here.) More specifically, the relationship between the ultimate goal of economic policy (consumer welfare), the primary means of achieving it (free markets, competition), and the mission of the antitrust laws (prohibiting conduct having significant anticompetitive effects) as a policy tool for promoting competition and therefore consumer welfare requires IMHO more explicit treatment. It is only against that backdrop that the function of the two most important proxies for anticompetitive conduct, market power (the ability and the incentive to raise prices) and market concentration (e.g., HHI measures) becomes readily apparent. That said, Kaplow’s and Shapiro’s paper is highly recommended. Download it while it’s hot.
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