Explain the behavioral and structural approaches to government antitrust policy. Identify one practical problem with each approach.

Question

What will be an ideal response?

Answer 1

Two approaches to identifying potential antitrust violations are the behavioral and the structural approaches. The behavioral approach attempts to identify anticompetitive behavior by firms (e.g., coordination, predatory pricing, and price leadership). Practical problems associated with the behavioral approach include limited public sector funds to identify and prosecute offenders and difficulties in proving violations have taken place. The structural approach assumes that if a market is highly concentrated, antitrust violations have probably occurred-that is, firms with market power will act in their own best interests. Practical problems associated with the structural approach include the view that a firm should not be penalized just because it has been successful (without any evidence of wrongdoing) and the fact that the emphasis on existing market structure does not take into account potential competition (e.g., contestable markets and international competition).