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Book Title: Post-Chicago Developments in Antitrust Law
Editor(s): Cucinotta, Antonio; Pardolesi, Roberto; Van den Bergh, J. Roger
Publisher: Edward Elgar Publishing
ISBN (hard cover): 9781843760016
Section: Chapter 5
Section Title: The Bounds Approach to Antitrust
Author(s): Van Cayseele, Patrick
Number of pages: 21
Extract:
5. The bounds approach to antitrust
Patrick Van Cayseele*
INTRODUCTION
In this chapter, I investigate to what extent an antitrust policy that aims at
breaking up cartels does better than a laissez-faire approach that relies on
entry. The answer to this question will depend on a variety of assumptions,
and hence will be different for each industry. Nonetheless, the aim of this
chapter is to provide an answer that holds across a broad run of industries.
Progress towards this goal can be made if one is willing to accept that the
question is answered only by indicating the limits of what cartel enforce-
ment can achieve relative to the laissez-faire. This is in line with what has
recently been done in the context of going for the game-theoretic founda-
tions of the old industrial organization, or the `bounds approach', see Sutton
(1997).
The `bounds approach' in general aims at providing foundations for struc-
turalist views such as the one that, in industries with high barriers to entry,
increasing concentration justifies antitrust action.1 The bounds approach can
also be extended for identifying the appropriate antitrust actions to follow, and
that is precisely what I intend to demonstrate. I will use a key element from
Sutton (1991), viz. a strong mechanism called the P(N) function, to shed light
on the role of entry and the limitations of anti-cartel enforcement rules, a topic
very much flavored by the Chicago tradition.2
The organization of the chapter is ...
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