Michael K. Block

The Deterrent Effect of Antitrust Enforcement

In this paper we formulate and test a model of collusive pricing in the presence of antitrust enforcement. We show that a cartels optimal price is likely to be neither the competitive price nor the price that the cartel would set in the absence of antitrust enforcement but rather an intermediate price that depends on the levels of antitrust enforcement efforts and penalties. Our empirical results reveal that increasing antitrust enforcement in the presence of a credible threat of large damage awards has the deterrent effect of reducing mark-ups in the bread industry.

The Spillover Effect of Antitrust Enforcement

We address the question of how the threat of antitrust enforcement spills over from one industrial submarket to another. We build a formal model describing the technology through which an initial antitrust indictment can reveal evidence of additional infractions in the same industry. Our approach is organized around the belief that the flow of information on antitrust violations is closely linked to commodity flows. As it turns out, our method proves able to explain the differential response of highway construction cartels in various states to recent changes in the severity of antitrust sanctions.

Factor Allocations Under Uncertainty: An Extension

In this paper the factor supply results of Leland. Sandmo and Block and Heineke are generalized to include the case of a household making a joint savings-labor supply decision when the returns to each factor are uncertain.