Optimal antitrust enforcement: information cost and deterrent effect

This study analyzes the optimal antitrust enforcement rule and, in doing so, presents a model that illuminates two important issues. First, it compares the per se legal and illegal judicial standards to the rule of reason judicial standard in terms of information costs and general social welfare. Second, it seeks to derive the optimal judicial standard that minimizes the problems of under- and over-deterrence. These two issues are closely related because the benefit of additional information can only be measured by its deterrent effects. In this respect, this work synthesizes economic models from decision theory and the public enforcement of law. Lastly, in addition to discussing the optimal information level, we derive the optimal permissiveness of the judicial standard, the optimal burden of proof, and the optimal punishment level. We also analyze how these policy variables are interrelated.