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Economic Regulation and Its ReformWhat Have We Learned?$
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Nancy L. Rose

Print publication date: 2014

Print ISBN-13: 9780226138022

Published to Chicago Scholarship Online: January 2015

DOI: 10.7208/chicago/9780226138169.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 30 November 2021

Antitrust and Regulation

Antitrust and Regulation

Chapter:
(p.25) 1 Antitrust and Regulation
Source:
Economic Regulation and Its Reform
Author(s):

Nancy L. Rose

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226138169.003.0002

Since the passage of the Interstate Commerce Act (1897) and the Sherman Act (1890), regulation and antitrust (competition policy) have operated as competing mechanisms to control competition. Regulation produced cross-subsidies and favors to special interests, but specified prices and rules of mandatory dealing. Antitrust promoted competition without favoring special interests, but could not formulate rules for particular industries. Antitrust and regulation can be viewed as complements, where policymakers assign control of competition to courts or regulatory agencies based on their relative strengths. Antitrust may act as a constraint on what regulators can do. Controlling competition is a particular challenge in network industries, where mediating “vertical” interactions across firms, particularly for “bottleneck,” or essential facilities, is important. This chapter uses a game theoretic framework of political bargaining and the historical record of antitrust and regulation across several regulated industries to explore positive and normative rationales for choosing between these policy instruments. It highlights the conditions under which competition policy and regulation may be complements rather than substitutes in the policy arsenal. The chapter argues that the deregulation movement reflected the relative competencies of antitrust and regulation, and describes the emergence of antitrust as the primary policy tool to control competition.

Keywords:   antitrust, competition policy, regulation, deregulation, industrial organization, political economy, capture

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