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Antitrust, Multi-Dimensional Competition, and Innovation: Do We Have an Antitrust-Relevant Theory of Competition Now?

Joshua D. Wright

Federal Trade Commission; George Mason University School of Law

August 28, 2009

George Mason Law & Economics Research Paper No. 09-44

Harold Demsetz once claimed that 'economics has no antitrust relevant theory of competition.' Demsetz offered this provocative statement as an introduction to an economic concept with critical implications for the antitrust enterprise: the multi-dimensional nature of competition. Competition does not take place upon a single margin, such as price competition, but several dimensions that are often inversely correlated such that a liability rule deterring one form of competition will result in more of another. This insight has important implications for the current policy debate concerning how to design antitrust liability standards for conduct involving both static product market competition and dynamic innovative activity. The primary purpose of this essay is to revisit Demsetz’s broader challenge to antitrust regulation in the context of the frequently discussed tradeoffs between innovation and price competition. I summarize recent developments in our knowledge of the relationship between competition and innovation, highlighting the deficiencies that significantly constrain antitrust enforcers’ abilities to confidently calculate inevitable welfare tradeoffs. I conclude by discussing policy implications that follow from these limitations.

Number of Pages in PDF File: 34

Keywords: Antitrust Modernization Committee, Baker, Gilbert, Katz, Merger Guidelines, Muris, patent, Rapp, Schumpeter, Shelanski, Sherman Act, Sunshine, uncertainty

JEL Classification: K21, K23, L40, L41, L42, L44, L51, O31, O32, O33, O34

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Date posted: August 29, 2009  

Suggested Citation

Wright, Joshua D., Antitrust, Multi-Dimensional Competition, and Innovation: Do We Have an Antitrust-Relevant Theory of Competition Now? (August 28, 2009). George Mason Law & Economics Research Paper No. 09-44. Available at SSRN: http://ssrn.com/abstract=1463732

Contact Information

Joshua D. Wright (Contact Author)
Federal Trade Commission ( email )
601 New Jersey Ave., NW
Washington, DC 20580
United States
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
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