by John O. McGinnis
Antitrust regulation of monopolies and mergers is largely a second-best policy. In a nation open to trade with well functioning capital markets and without regulations that burden incumbents and exclude entrants, monopoly prices are hard to sustain. Like a dinner bell, they are instead a signal to others to come and get some juicy profits. These profits not only encourage existing firms to expand their operations but also entice entrepreneurial individuals to enter these markets. But if regulations make markets less dynamic, the price mechanism won’t work nearly as well. Regulations can make it harder for new firms to enter and for incumbent firms to expand.
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