ANTITRUST POLICY AND MERGERS: THE WEALTH EFFECT OF SUPREME COURT DECISIONS

Many believe that antitrust policy has had a dramatic impact on merger strategies in the United States. For this to be true, enforcement of antitrust laws must affect a wide range of firms, not just those firms whose mergers are contested. This study tests whether or not firms engaged in uncontested mergers are affected by antitrust enforcement, as signalled by Supreme Court decisions. Using event study methodology, we find that antitrust policy against mergers was binding during the 1960s and 1970s as it ulowered the value of targets in ucontested ongoing mergers.     

RENT CREATION AND RENT SHARING: NEW MEASURES AND IMPACTS ON TOTAL FACTOR PRODUCTIVITY

This analysis proposes new measures of rent creation and rent sharing and assesses their impact on productivity on cross‐country‐industry panel data. We find first that: (1) anticompetitive product market regulations positively affect rent creation and (2) employment protection legislation boosts hourly wages, particularly for low‐skill workers. However, we find no significant impact of this employment legislation on rent sharing, as the hourly wage increases are offset by a negative impact on hours worked. Second, using regulation indicators as instruments, we find that rent creation and rent sharing both have a substantial negative impact on total factor productivity. (JEL E22, E24, O30, L50, O43, O47, C23)     

ECONOMICS AND 100 YEARS OF ANTITRUST: INTRODUCTION

Editor's Note: I wish to thank the symposium editors, George Bittlingmayer, Associate Professor, and Gary Walton, Professor, Graduate School of Management, University of California Davis, Davis, CA., for their special efforts and valuable input as they shepherded these papers through the refereeing and editorial process. I also wish to thank Rodney T. Smith, Professor of Economics, Claremont McKenna College and Claremont Graduate School and Coeditor of Economic Inquiry, who served as coordinator of the symposium efforts, and Carolyn Williams, assistant to the editor, who served as liaison between Economic Inquiry, the symposium editors and the authors. These combined efforts have resulted in the exciting collection of papers that follow.     

COMPARING MONOPOLY AND COMPETITION: THE INCREASING-COST CASE

When an increasing-cost competitive industry becomes monopolized, the monopoly will possess some monopsony power in input markets. This paper presents a simple analysis comparing the performance of monopoly and competition in this case. It first assumes fixed input proportions, and then turns to the general case of variable input proportions. With variable proportions, it is shown that the monopoly's marginal cost curve lies above the competitive supply curve but the monopoly's average cost curve lies below it. The welfare cost of monopoly is not identified by the area between the monopoly's marginal cost curve and the demand curve in either case.     

RENT SEEKING AND DEMOCRACY: EMPIRICAL EVIDENCE FOR URUGUAY

We provide evidence for Granger causality between rent-seeking behavior and democracy in Uruguay, where both rent-seeking behavior and political shifts have varied widely in the past 80 yr but ethnolinguistic heterogeneity and inequality have remained low. This helps identify "pure" interactions and their link with rent-seeking outcomes. The presence and duration of democracy appear to have been conducive to a decrease in rent seeking, although the reduction in rent seeking does not appear to have had a bearing on the quality of democratic regime. While the duration of democratic regime may impact rent-seeking behavior, rent seeking also displays a Granger causality to democratic duration. ( JEL O10, O1)     

STACKELBERG, COURNOT AND COLLUSIVE MONOPOLY: PERFORMANCE AND WELFARE COMPARISONS

This article compares and evaluates performance and welfare in three classical oligopoly models: Stackelberg leader, Cournot, and collusive monopoly. Hahn's stability conditions render an unambiguous ranking of market price; the monopoly price is highest and the Stackelberg price is lowest. Welfare comparisons are less clear-cut due to additional effects coming from reallocation of outputs among sellers. Conditions under which these reallocation effects will enhance or offset the unambiguous price effects on welfare are discussed and examples are given. Possible implications for antitrust policy, regarding constraints on market share of large producers in noncompetitive markets, are examined.