Micro Economy Chap13
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Transcript of Micro Economy Chap13
Chapter 13: Antitrust and Regulation
Antitrust policy Sherman Act (1890)
Outlaws contracts and conspiracies in restraint of trade
Forbids monopolization Does not describe what is prohibited
Clayton Act (1914) Bans price discrimination designed to limit
competition Prohibits tying and exclusive dealing contracts
Federal Trade Commission Act (1914) Established the FTC to administer antitrust laws
Antitrust enforcement 1890-1914 – little enforcement Through 1945 – “rule of reason” –
size alone was not sufficient evidence of an antitrust violation
1945 – Alcoa case – per se rule 1980s – return to rule of reason 1990s – stricter enforcement 2000 onward – less strict
enforcement
Herfindahl index Herfindahl index = sum of squared
market shares (as percentages) (varies from 0 to 10,000)
Justice Department guidelines < 1000 – highly competitive Between 1000 and 1800 – moderately
competitive > 1800 – highly concentrated
Global antitrust Growing volume of international
trade makes antitrust regulation more complex (due to different laws in different countries)
Other regulation Economic regulation
Antitrust laws Laws affecting price and output
Social regulation Health and safety standards Workplace safety Environmental standards Etc.
Costs and benefits of regulations Cost estimates are in the range of
$400 - $800 billions Benefits – gains to society
Deregulation airlines and trucking – 1970s Banking – 1980s
SEC Securities and Exchange
Commission – created in 1934 Requires reporting of annual financial
reports in standard format Sarbanes-Oxley Act of 2002
Auditing and consulting services must be provided by different firms.
Required the CEO to sign financial statements