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Competition Policy and Price Fixing$
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Louis Kaplow

Print publication date: 2013

Print ISBN-13: 9780691158624

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691158624.001.0001

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Social Welfare

Social Welfare

Chapter:
(p.217) 8 Social Welfare
Source:
Competition Policy and Price Fixing
Author(s):

Louis Kaplow

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691158624.003.0008

This chapter examines the social welfare consequences of coordinated oligopolistic price elevation. From the outset, it is notable that none of the pertinent theory directly distinguishes between successful coordination due merely to recognized interdependence and that resulting from classic cartel behavior, or various cases in between. The harm from price coordination in terms of allocative inefficiency or loss in consumer welfare depends most directly on the extent and duration of supracompetitive pricing. From a dynamic perspective, price elevation may also cause production inefficiency on account of excessive entry. The expectation of above-marginal-cost prices also induces a number of other kinds of investments, many (but not all) of which are efficient.

Keywords:   social welfare, price elevation, coordinated price elevation, oligopolistic price elevation, price coordination, consumer welfare

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