common law statute law and the theory of legislative choice an inquiry into the goal of the sherman act although the sherman antitrust act is more than a century old debate continues over its goals in contrast to what many have argued i contend that the act s main goal is to maximize economic efficiency rather than the welfare of consumers the sherman act is a modest extension of the common law which the law and economics literature indicates moves towards economic efficiency further unlike the interstate commerce act of 1887 sherman act decisions are made by courts not a regulatory agency thus the theory of legislature choice also implies that the goal of the act is to maximize economic efficiency

price competition and market structure the impact of cartel policy on concentration in the uk this paper examines the impact of firms conduct on market structure it studies the evolution of concentration in uk manufacturing following the abolition of cartels using a theoretical framework based on sutton s theory of market structure and a panel data set of four digit industries over 1958 1977 the econometric results suggest that the intensity of price competition has a positive impact on concentration in exogenous sunk cost industries as well as in advertising intensive and r d intensive industries the concentration market size relationship while negative in exogenous sunk cost industries breaks down in industries with high advertising or r d intensity

tax evasion across italy rational noncompliance or inadequate civic concern the paper suggests anexplanation for the geographical dimensionof tax evasion that focuses on thestructure of territorial government taxesadministered by the central government arenot differentiated by regions poor areasmay prefer a combination of lower taxes andlower levels of public services at both thecentral and the local level this isespecially true when income and wealthlevels differ among the areas and thedemand for publicly provided goods iscorrelated to these levels but the use ofnationally uniform tax schedules imposes awelfare burden on poorer areas while thetax rates of local taxes can be adjusted tolocal preferences tax evasion may betacitly accepted as a compensation for thewelfare loss deriving from too highcentrally set tax rates

competition and the relative productivity of large and small firms using a comprehensive dataset on the incidence of price fixing across british manufacturing industries in the 1950s i compare collusive and competitive industries and find evidence of a negative relationship between collusion and the labour productivity of larger firms relative to smaller firms in particular collusion is associated with a reduction or even a reversal of the productivity gap between larger and smaller firms this result is robust to controlling for the potential endogeneity of collusion

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

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

strategic r d with spillovers collusion and welfare the author considers a two stage r d then output or price duopoly game in which r d spills over so reducing the marginal cost of both the investing firm and its rival the author compares the noncooperative regime to three collusive regimes joint venture collusion on r d price fixing collusion at the price or output stage and merger collusion at both stages and evaluates under what circumstances a collusive regime improves welfare if spillovers are sufficiently large all three regimes are beneficial although mergers are more likely and price fixing less likely to produce specific benefits than are joint ventures copyright 1994 by blackwell publishing ltd

the effect of competition on wages and productivity evidence from the united kingdom abstract i examine the impact of competition on wages and productivity using a panel data set of u k manufacturing industries over 1954 1973 the introduction of cartel law in the united kingdom in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries but it did not affect those industries that were not cartelized the econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labor productivity growth there is no evidence of any effect of collusion on wages these results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with u s data

competition innovation and the use of innovations i examine the effect of competition on the production and use of innovations using evidence from a natural experiment of policy reform the introduction of cartel legislation in the uk in the late 1950s i compare manufacturing industries which had been collusive and were therefore affected by the policy with those that had been competitive and were not affected the intensification of competition following the abolition of cartels caused a short run decrease in innovations produced but had no significant effect in the long run in contrast innovations used increased both in the short run and in the long run

collusion profitability and welfare theory and evidence abstract in a differentiated oligopoly model with free entry the static welfare loss from collusion is larger the lower the entry cost the larger the market size and the higher the degree of product differentiation the cartel overcharge is larger the lower the entry cost and the larger the market size and is independent of the degree of product differentiation these theoretical results are consistent with evidence from a natural experiment of policy reform the introduction of cartel law in the uk in the late 1950s price cost margins declined after the breakdown of cartels in low capital and larger sized industries relative to capital intensive and smaller sized ones there is weaker evidence of a fall in price cost margins in consumer good and advertising intensive relative to producer good and low advertising industries crucially these effects are not observed for industries that were not affected by the cartel law a comparison of these findings with evidence on the incidence of collusion suggests that the welfare loss from collusive pricing may often be smaller in industries where cartels tend to form than in those where collusion is more difficult to sustain

asymmetric information in securitization an empirical assessment abstract asymmetric information in securitization deals is analyzed based on a unique dataset comprising a million mortgages both securitized and not and using a methodology previously applied to insurance data that looks at the correlation between risk transfer and default probability the main finding is that for given observable characteristics securitized mortgages have a lower default probability than non securitized ones we show that this finding is consistent with banks caring about their reputation for not selling lemons

product differentiation and price collusion the paper analyzes the implications of price collusion with or without monetary transfers on the degree of horizontal product differentiation we find that the principle of minimum differentiation holds i e firms sell the same product when there is no possibility of monetary transfers on the contrary we find that the presence of monetary transfers may induce some product differentiation the reason is that when monetary transfers are possible it is not essential per se to be well located in terms of relative market shares the outcome is then shown to be driven by only two forces 1 choosing a product closer to the competitor s improves the bargaining power 2 choosing a product closer to the one maximizing the joint profit improves the global firm efficiency

private interest support for efficiency enhancing antitrust policies recent discussions of antitrust based on the private interest theory of government conclude that the real as opposed to the stated purpose of antitrust legislation is to protect politically influential industries against competition yet several prominent antitrust scholars who accept the private interest theory of government in general see antitrust legislation serving the public interest by increasing competition we argue that the private interest theory of government is consistent with the view that antitrust legislation promotes competition indeed antitrust legislation may be supported by organized interest groups because such legislation increases the competition they face i introduction the traditional justification for the enactment and enforcement of antitrust legislation is that it serves the public interest by preventing businesses from engaging in practices that reduce competition over the last decade some economists have become skeptical of this justification a small but growing number of economists see the public interest justification for antitrust enforcement as a pretense for using government to promote the private interests of politically organized groups 1 within the private interest theory of government model it is natural to see antitrust activity as motivated by the desire to reduce rather than increase competition certainly a private interest is better served by obtaining an anticompetitive increase in the price of the product being sold than by obtaining a competitive reduction in the price of one of the many products being bought yet major contributors to and strong supporters of the private interest theory of government are reluctant to embrace the private interest explanation of at least the origins of antitrust policy george stigler for example has said so far as i can tell it s the sherman act a public interest law i like the sherman act 2 bork 1978 61 has argued that the legislative history of the sherman act displays the clear and exclusive policy intention of promoting consumers welfare and according to posner 1976 23 the framers of the sherman act appear to have been concerned mainly with the price and output consequences of monopolies and cartels with the view prevalent even among those sympathetic with the private interest theory of government that antitrust legislation owes much to the desire for a more competitive economy it is not surprising that antitrust policy has been resistant to private interest explanations 3 our purpose is to weaken this resistance by arguing that the private interest theory of government is not necessarily inconsistent with the view that support for antitrust activity is motivated by the desire to increase the competitive efficiency of the general economy indeed we shall argue that the private interest theory of government suggests that organized interests may favor antitrust actions as a means of limiting their own anticompetitive practices it should be emphasized at the outset that we will not attempt to establish that antitrust enforcement does increase economic efficiency our more modest objective is to reconcile the seemingly inconsistent views of those who both accept a private interest theory of government and believe that economic efficiency is served by antitrust policy the difficulty of addressing the issue of the effect antitrust enforcement has on the overall efficiency of the economy is reflected in stigler s 1982 44 admission it would be gratifying to me if i could report that our profession s changing view toward support of antitrust policy was based upon the systematic study by economists of the effects of the policy in short that hard evidence carried the day unfortunately there have been no persuasive studies of the effects of the sherman and clayton acts throughout this century 4 in the next section we present a simple model of a coalition of industries each of which is interested in achieving its own protection in political competition with other industries

partial collusion fosters minimum product differentiation we investigate a spatial duopoly in which the firms simultaneously select locations at the beginning of time once chosen the locations are fixed forever but the firms will choose prices in each of a countably infinite succession of time periods we are interested in equilibrium behavior when the firms will collusively arrange a trigger strategy equilibrium in prices and will select their locations knowing that a particular such trigger strategy price equilibrium will ensue specifically we restrict our attention to prices that support an outcome on the profit possibility frontier at which the ratio of firm 1 s profits to those of firm 2 is positively related to the similar ratio of profits at the single shot noncooperative equilibrium for these profit sharing rules the resulting location equilibrium is unique and involves the pairing of firms at the market center

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

public provision of private goods government may provide a good that can if legally permitted be supplemented by private purchases policy is determined by majority rule under standard assumptions on preferences a majority voting equilibrium exists a regime of positive government provision with no restriction on private supplements is shown to be majority preferred to a regime of either only market provision or only government provision combined public and private expenditure on the good is higher under this dual provision regime than under either of the alternatives under some preference configurations the median income voter is pivotal under others a voter with income below the median is pivotal

price competition non price competition and market structure theory and evidence from the uk this paper examines the impact of price competition on advertising r and d expenditure and market structure a general theoretical result is derived which restricts the space of possible outcomes regarding the behaviour of concentration and advertising r and d expenditure following an intensification of price competition the theory is tested using uk data on the evolution of competition concentration and advertising over 1954 77 the econometric results suggest that the introduction of restrictive practices legislation in the uk caused a rise in concentration in previously cartelized high advertising manufacturing industries and probably also a fall in advertising intensity

in which industries is collusion more likely evidence from the uk i examine the factors facilitating or hindering collusion using a comprehensive data set on the incidence of price fixing across uk manufacturing industries in the 1950s the econometric results suggest that collusion is more likely the higher the degree of capital intensity and less likely in advertising intensive than in low advertising industries there is also some evidence of a non monotonic relationship between market growth and the likelihood of collusion there is no clear link between concentration and the incidence of collusion

welfare losses in oligopoly and monopolistic competition estimates of the magnitudes of monopoly welfare losses mwl appearing in the economics literature have tended to differ quite widely at one end of the spectrum we find figures of the order of o i of gnp quoted by harberger i 954 in his pioneering study while at the other extreme cowling and mueller i 978 have derived estimates of around i o of gross corporate product from some of their measures two of the major sources of such differences lie in the treatment of a the general equilibrium aspects of deviations between prices and marginal costs and b the impact of market power on the cost levels of firms but unfortunately the tendency of writers to adopt rather different analytical frameworks often makes it difficult to accurately assign the variations in the estimates to specific factors in the present paper the issue of monopoly welfare loss is considered in the context of a differentiated goods model based upon work on monopolistic competition by spence i976 and by dixit and stiglitz i977 within a set of common assumptions about demand the effects of varying cost conditions and differing equilibria on the level of mwl are examined on this basis four major factors connected with suboptimal resource allocation can be identified a supernormal profits b product differentiation c suboptimal scale and d factor bias the first of these needs little explanation its association with welfare loss has been well explored in structure conduct performance theory and is used extensively in applied anti trust economics attention will therefore be focused upon the remaining three all of which can produce mwl in zeroprofit equilibria the paper is organised as follows section ii sets out and discusses the differentiated goods framework which will be used throughout the rest of the analysis it is also shown how a simple transformation of variables reduces the model to the homogeneous goods case and thereby makes immediately available a number of familiar results from the structure conduct performance literature in section iii the focus is on welfare analysis of monopolistic competition the results here are essentially restatements of earlier work although the transformation of variables helps to clarify their foundations section iv extends the analysis to incorporate additional decision variables such as advertising research and development etc while section v considers the case where market conditions will not sustain a large number of firms in equilibrium and suboptimal scale effects become important factor bias is analysed in