ECONOMIC WELFARE, PRICE AND PROFIT: THE DETERRENT EFFECT OF ALTERNATIVE ANTITRUST REGIMES

This paper critically examines the deterrent effect of price-fixing statutes under alternative antitrust regimes. A regime is defined by the litigation strategy which the antitrust agency employs in detecting cartels and in determining whether prosecution is warranted and by the basis upon which courts estimate damages. The results of the analysis suggest that antitrust policy may actually induce cartels to further restrict output, increasing welfare loss above the level imposed by an unthreatened, perfect monopoly. Litigation strategy and damages should be founded upon consideration of welfare loss measures to avoid this possibility.