Workable Antitrust Policy

Abstract

One of the schools of thought in the economics of antitrust was called The adherents to this school believed that markets were prone to cartelization and that concentration was death on competition, but that occasionally might prove workable. These scholars were suspicious of almost every industrial practice they saw. One of the manifestations of their work came to be known as the paradigm. The thesis was that you could tell whether was feasible from the structure of the market. If the top four firms had fifty percent or so of the sales, we should abandon hope of unless, perhaps, the government should be able to break up the largest firms and restore workable competition. The vision was supported by data showing that the most concentrated industries were also the most profitable -and monopoly profit seemed the only source of the higher returns. This vision of markets fell under attack by other scholars who were skeptical about the interpretation of the data. Concentration was a fact, and no one doubted that concentrated markets were easier to cartelize (or to organize informally) than atomistic markets. Indeed some of those most skeptical about the implications of concentration also worked out the models showing how concentration could duplicate the effects of collusion even without agreement.1 But the skeptics doubted the model of on which the structure-conduct-performance paradigm rested. It is a model of perfect competition taken from classical economics, a model in which everyone is perfectly informed and makes hyper-rational decisions on a moment's notice, a model in which everyone is minuscule compared to the market and so cannot affect anyone else's acts or the price, a model in which these