Stick Versus Carrot: Comparing Structural Antitrust and Behavioral Regulation Outcomes

Debates on whether structural antitrust remedies or behavioral regulatory remedies should be used to implement institutional mandates are long-standing. Historical data for an entire population of firms for a fourteen-year period have been used, in a natural experiment format, to evaluate the impacts of both (a) structural antitrust policy (stick) and (b) behavioral regulation (carrot), for (i) exactly the same efficiency outcome, (ii) for the same firms, and (iii) at the same time. The results indicate that the stick has been less effective than the carrot. Implementation of regulations has had a significantly larger economic impact relative to implementing structural antitrust remedies on firm efficiency. Fiscally, annual incremental gains generated by the regulatory approach versus the antitrust approach have been over US$2 billion. Behavioral institutional design, implementation, and outcome assessments could be based on dynamic evolutionary process ideas situated within a managed incentive regulation framework. Given recent clamor for actions against technology companies, the facts suggest that behavioral regulations could constrain unacceptable firm behaviors and the results question contemporary antitrust remedies’ relative efficacy.