*Professor of Economics, Columbia University. I would like to thank Susan Rose-Ackerman and Bruce Bassett for their comments on an earlier draft of this paper.
WHAT PRICE THEORY CAN—AND CANNOT—DO FOR ANTITRUST
Version of Record online: 27 JUL 2007
Contemporary Economic Policy
Volume 3, Issue 2, pages 3–11, December 1984
How to Cite
DEWEY, D. (1984), WHAT PRICE THEORY CAN—AND CANNOT—DO FOR ANTITRUST. Contemporary Economic Policy, 3: 3–11. doi: 10.1111/j.1465-7287.1984.tb00791.x
- Issue online: 27 JUL 2007
- Version of Record online: 27 JUL 2007
This paper examines the methodology and policy recommendations of Judge Robert Bork's writing on antitrust. It accepts as valid his premise that conventional price theory is the only appropriate organon for evaluating the welfare impact of an antitrust rule. However, it holds that in the analysis of cartels and mergers, Bork does not realize the full implications of his approach.
Of the many prohibitions which antitrust law now contains, Bork wants to retain only two-the prohibition of cartels and of large horizontal mergers. Even these two, however, cannot be maintained on pure price theory grounds. According to price theory, if price or merger agreements are inefficient, and i f entry and exit are free, then these agreements-like other inefficient practices-will be eroded by entry. Consistently applied, then, price the0 y provides no support for antitrust laws.
A lack of support on price theory grounds does not imply that antitrust laws are unjustified. Most practices prohibited by anti-trust law have closesubstitutes. Consequently, the law probably inflicts no great harm on economic efjiciency. Moreover, repeal of these laws could result in state-owned monopolies or economic planning, both of which would be far worse for economic efficiency.