Antitrust Schools of Thought the Essay

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The Structural approach believes high barriers to entry reduces efficiency and the potential entry may not limit the power of incumbent firms. Chicago believes barriers to entry are due to the efficiency of incumbent firms and the potential to entry limits the economic power of incumbents. On the other hand, New IO believes barriers can be present, especially from the economics of standardization that can lead to market power of an incumbent. The New IO approach agrees with the Structural approach where market power derives from horizontal power and vertical arrangements, but also views market power as extended through strategic behavior. Chicago, on the other hand, views market power as only deriving from horizontal factors.

The Structural approach believes that collusion can be expected with profit increases and is more likely in concentrated markets. The Chicago approach believes that is not likely due to the difficulty of enforcement and is more likely in government regulated and protected markets.

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New IO believes that collusion is possible with repeated encounters and agrees with Chicago that is it more likely in government regulated and protected markets. The Structural approach views correlation between concentration and profits as a positive correlation indicated more concentration reducing market efficiency and increasing profits where Chicago views the positive correlation as more likely due to lower costs of larger firms. New IO agrees with Chicago in lower costs, but also views positive correlation as due to market power and strategic opportunities as well.

The Chicago approach is better because it promotes competition and values economic efficiency as individual choice and responsibility. Consumers and firms benefit from lower costs. And efficiency comes from an appropriate number of firms without reducing efficiency......

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