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How the Chicago School Overshot the MarkThe Effect of Conservative Economic Analysis on U.S. Antitrust$
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Robert Pitofsky

Print publication date: 2008

Print ISBN-13: 9780195372823

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780195372823.001.0001

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Some Practical Thoughts About Entry

Some Practical Thoughts About Entry

Chapter:
(p.24) Some Practical Thoughts About Entry
Source:
How the Chicago School Overshot the Mark
Author(s):

Irwin M. Stelzer

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195372823.003.0003

This paper characterizes the conservative view as follows: it looks at antitrust as inefficient, contributing unwisely to an excess of government regulation, and unnecessary because market power is transient and only economic analysis (i.e., efficiency) matters. It then examines various kinds of anticompetitive behavior, particularly low or “predatory” prices by a dominant firm, from an unusual and perhaps unique point of view. Conservative analysis argues that if there is ease of entry, there is no problem that antitrust needs to address. If the wrongdoer tries to raise prices or curtail output, it will be swamped, so the argument goes, by new entry. The paper asks what a venture capitalist would consider before supporting efforts of a smaller challenger to enter a dominant firm's market. If the entrenched dominant incumbent can rely on a variety of coercion and intimidation tactics, as conservatives seem to allow, venture capitalists will often not support the challenger. As a result, the goal of protecting a free market to provide a fair and open opportunity to all comers will not be served. To achieve that goal, the antitrust laws must be vigorously enforced — that is not the state of affairs today.

Keywords:   conservative, antitrust, government regulation, predatory prices

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