By Dominich Armentano
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Extra resources for Antitrust And Monopoly: Anatomy of a Policy Failure
Moreover, there is said to be a social welfare-loss due to the misallocation of resources associated with the collusive output restriction. Firms under monopolistic or imperfect competition still attempt to maxi mize their profit by selling an output where marginal revenue equals marginal cost. But if products are not perfect substitutes, the demand function each firm faces is downward sloping, and the price that each firm charges will 20 COM PETITION THEORY AND TH E MARKET ECONOM Y Quantity Figure 4 A firm with “ monopoly power” produces less (Q M ) and charges more (PM ) than a “ competitive” firm.
Importantly, these adjustments are not limited to price and output, as in the standard model, but may encompass any aspect of exchange that consumers believe to be relevant. Finally, even collusive agreements can be efficient if one adopts a coordinating theory of efficiency and market process. These theoretical arguments concerning competition have important practical implications. Antitrust policy in the United States has often been associated with that vision of competition inherent in the perfectly competi tive equilibrium.
31 Yet if this standard theory of competition and resource allocation is incorrect or irrelevant, then the legitimacy of all antitrust policy must be open to the most serious question. M A R K E T S T R U C T U R E AND IN D U ST R IA L O R G A N IZ A TIO N One might think that this criticism of the standard competitive perspective would have settled the policy issues decisively. It would seem that no serious MARKET STRUCTURE AND INDUSTRIAL ORGANIZATION 33 student of antitrust could hold perfect competition as an optimal benchmark, or attempt to employ the perfectly competitive structure as an ideal one for real-world competition.
Antitrust And Monopoly: Anatomy of a Policy Failure by Dominich Armentano