Unlocking Technology: Antitrust and Innovation
Journal of Competition Law and Economics, May 8, 2008
72 Pages Posted: 16 Jun 2008 Last revised: 18 Jan 2014
Technology lock-in advocates argue that governments should step in to coordinate technology adoption decisions. Due to the presence of network effects, advocates warn that consumers may fail to adopt the best technology, thus missing out on potential benefits. Even worse, consumers may split, adopting multiple technologies and thus missing out on the benefits of network effects. Due to coordination problems, consumers cannot mitigate the effects of bad technology choices and the economy becomes stuck with inferior innovations. This article demonstrates that consumer coordination solves the underlying network effects problem thus eliminating technology lock-in. Network effects are confined at most to the information and communications technology and selected electronics industries, which have developed mechanisms for interconnection and interoperability. Firms have incentives to provide interconnection and interoperability when it is efficient to do so. Rapid technological innovation is apparent while technology lock-in is a rare phenomenon. Antitrust policy founded on technology lock-in arguments is misguided and is likely to damage incentives for innovation.
Keywords: Innovation, Technology, Network effects, Antitrust, Technology Lock-in, Interoperability
JEL Classification: L1, L4, K21, O3
Suggested Citation: Suggested Citation