Consumer Surplus as the Appropriate Standard for Antitrust Enforcement

Competition Policy International, Vol. 3, No. 2, Autumn 2007

21 Pages Posted: 17 Dec 2007

See all articles by Russell W. Pittman

Russell W. Pittman

U.S. Department of Justice - Economic Analysis Group; Kyiv School of Economics; New Economic School (NES)

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Abstract

In antitrust enforcement, in the context of cost-benefit analysis, neoclassical economics may be interpreted as arguing for the use of a total welfare standard whose implementation treats transfers as welfare-neutral. Several recent papers call for antitrust agencies to move in the direction of this version of a total welfare standard for enforcement. However, as Oliver Williamson noted in his 1968 paper, horizontal mergers typically result in transfers that may greatly exceed in magnitude any dead-weight loss or efficiency gain, so that a decision to ignore transfers may be quite important. In this paper, I argue that such transfers are likely overall to be quite regressive, and thus that a consumer surplus standard rather than a total welfare standard may be appropriate for antitrust. Two common arguments against this standard that most mergers are in markets for intermediate goods, and that a consumer welfare standard implies a tolerance for monopoly are examined and found wanting. I argue in addition that, even if a total welfare standard is used, both the finance literature on merger outcomes and the structure of the U.S. enforcement agencies suggest that the use of a consumer surplus standard by the agencies is more likely to achieve that goal.

Keywords: antitrust, enforcement, welfare standards, consumer surplus, total welfare, horizontal mergers, competition law, competition policy

Suggested Citation

Pittman, Russell, Consumer Surplus as the Appropriate Standard for Antitrust Enforcement. Available at SSRN: https://ssrn.com/abstract=1075463

Russell Pittman (Contact Author)

U.S. Department of Justice - Economic Analysis Group ( email )

450 5th St. NW
Antitrust Division
Washington, DC 20530
United States
202-307-6367 (Phone)
202-307-3372 (Fax)

Kyiv School of Economics ( email )

vul. Yakira, 13, 3d floor, suite 334
Kyiv, 04119
Ukraine

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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