Antitrust, Strategic Trade Policy and Social Welfare

This paper examines social welfare effects of antitrust regulation in the presence of strategic trade policy within a reciprocal market model. Using a simple two-country trade model, we show that the enforcement of antitrust policy in the domestic market unambiguously improves the domestic social welfare, while the foreign social welfare may increase or decrease depending on the degree of product differentiation in the domestic market after the enforcement of the domestic antitrust act. Moreover, it is shown that the domestic country ends up with higher social welfare than the foreign country after the antitrust act implemented in the domestic industry