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NCJRS Abstract

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NCJ Number: 73784 Find in a Library
Title: Economics of Antitrust Enforcement - Theory and Measurement
Journal: Georgetown Law Journal  Volume:68  Issue:5  Dated:(June 1980)  Pages:1121-1130
Author(s): R J Reynolds
Date Published: 1980
Page Count: 10
Format: Article
Language: English
Country: United States of America
Annotation: The identification and measurement of the effects of antitrust enforcement in various markets are examined, and an alternative measurement approach is suggested.
Abstract: An economic model of law enforcement as suggested by Professor W. Schwartz (NCJ-73781) suffers from the lack of availability of empirical data regarding the effects of antitrust action. As one method of filling the information gap, the article examines the effects of an individual antitrust court case on companies in the immediate market in which the case is brought and on companies outside that particular market. The examination develops three major principles: (1) the necessity to model carefully the incentives and interactions of the actors in the business setting; (2) the limitation of observed effects to circumstances in which a firm alters its strategy in response to the court case and altered antitrust risks; and (3) the underestimation of the effects of law enforcement, since the analysis cannot capture the extent to which lower levels of enforcement would have dissuaded from choosing illegal business strategies. The article concludes that the examination of the effects of individual antitrust cases is a flawed measurement because it captures only a fraction of the effects produced by a case in all markets. A better approach defines an antitrust 'regime' as a set of probability functions and costs (i.e., penalties) associated with a set of strategies. Under this analysis, the effects of antitrust enforcement would be measured by a comparison of the effects of different antitrust regimes. In particular, the effects of a regime with enforcement would be compared with the effects of a regime without enforcement. The type of research the article proposes is still at a fairly early stage. The article includes bibliographical information.
Index Term(s): Antitrust offenses; Data collections; Deterrence effectiveness; Economic analysis; Law enforcement; Testing and measurement; Trade practices
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