Policy implications
As for the policy implications of the theories just surveyed, the economists’ reactions to the antitrust laws have already been mentioned. When the Sherman Act was passed in 1890, with the intention of defending small businesses from the price policies of the trusts that had formed in the previous 20 years, there was a critical reaction from the economists (DiLorenzo and High 1988).
Many of them welcomed large-size firms for their efficiency gains; as already seen, they very much believed in the effectiveness of the threat of entry by new firms. However, in the following decades the economists acknowledged that exclusionary practices played a dangerous role; this mitigated their faith in potential competition, and led them to call for greater government intervention in controlling firms’ strategies against potential competition, and in regulating public utilities and transportation.In summary, although the real history of the discipline had not yet officially begun, we find here a great number of issues that today are part of the realm of IO. They were intensely debated in Europe as well as in the US. As the notion of perfect competition was worked out, the boundary of IO was defined, and the classical idea of competition was shifted into this “new” discipline.