ESSAYS IN THE ECONOMIC ANALYSIS OF THE ANTITRUST LAWS (SHERMAN ACT, MONOPOLY, PRICE SQUEEZE, TREBLE DAMAGES, DIVESTITURE)

This thesis seeks to apply formal methods of economic analysis to several issues that have inspired discussion and controversy in the literature of law and economics. Some of the recent developments in industrial organization and applied economic theory are contrasted with the approach adopted by the predominant school of antitrust commentary. Models are considered that seek to explain and evaluate a particular phenomenon addressed under Section 2 of the Sherman Act, i.e., the price or supply "squeeze". The properties of one simple model are examined first. A second model, seeking to provide a consistent explanation of both the initial heterogeneous structure of an industry and any subsequent incidence of squeezing, is then put forward. Squeezing is shown to be a possibility in this model that may, under specified conditions, reduce social welfare.;A relatively little used remedy is divestiture. A review of the general argument regarding the merits of the divestiture remedy is conducted. A formal model of a market consisting of a multi-plant dominant firm and a fringe of single-plant-firm followers is constructed. This model shows that several results may flow from divestiture that have not previously been stressed as possibilities in the literature. Divestiture, for example, may reduce the average cost of fringe firms at the same time that it increases the costs of the dismembered firms. Also, a rise in the percentage of the market held by the dominant firm (i.e., its constituent components) may indicate a rise in total market output and a rise in social welfare. Simulation results are presented for the model reviewed, indicating gains in social welfare accruing as the result of divestiture in the strong majority of cases. A somewhat weak or nonexistent deterrent effect is associated with divestiture. (Abstract shortened with permission of author.);I then turn to an examination of the remedies available under the antitrust laws, beginning with the deterrent effect that private treble damange suits exert with respect to potential perpetrators of unlawful antitrust conduct. Deterrence is evaluated in general terms. These analyses indicate that treble damages probably deter price fixing, but that the threat of private suits may not deter unlawful monopolistic conduct.