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On Anti-Monopoly Regulation: Insight from Decision Theory and Policy Implications

LIN Ping;Shandong University,School of Economics;  
Anti-monopoly has become unprecedentedly important in China recently.This paper examines the extent to which the Easterbrook's “error-cost” framework applies in China, and explores the elements and requirements of a scientific framework for anti-monopoly regulation.It first points out and emphasizes the notion of imperfect observability of antitrust errors and their social costs.It then characterizes the error-cost minimizing level of anti-monopoly regulation and conducts comparative static analysis which reveals that the optimal level of anti-monopoly regulation is lower in new fields of the digital economy, innovative industries, or sectors with active entry.It also extends the basic model to the “two-tier” enforcement arrangement in China and shows that each local authority may choose over-enforce or under enforce the law, even when they strictly follow the “error-cost” minimization criterion with respect to their own local economy.Replacing the current delegation system with a “local central enforcement office” arrangement may help overcome the problem.Finally, China must clearly set out its welfare standard in its Anti-Monopoly system.
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