When is Static Analysis a Sufficient Proxy for Dynamic Considerations? Reconsidering Antitrust and Innovation

33 Pages Posted: 14 May 2010  

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: April 29, 2010

Abstract

This paper examines the claim that dynamic considerations play a particularly important role in certain industries (in particular, those characterized by high rates of product innovation) and, consequently, render antitrust analysis based on static concepts inappropriate or misleading. By expositing and applying the fully dynamic model of Segal and Whinston (2007), I argue that, in many cases, static analyses are not misleading and that dynamic considerations (such as competition for the market) are not decisive in these analyses. I argue, however, that dynamic considerations can be important when the predominant mode of commercialization by innovative entrants is via cooperation rather than competition with incumbent firms; examples of cooperation include acquisition and licensing. Therefore, this means that static measure of competition are likely to be reinforced in certain circumstances by related dynamic considerations.

Keywords: innovation, antitrust, exclusion, tying, licensing

JEL Classification: K21, L40

Suggested Citation

Gans, Joshua S., When is Static Analysis a Sufficient Proxy for Dynamic Considerations? Reconsidering Antitrust and Innovation (April 29, 2010). Available at SSRN: https://ssrn.com/abstract=1603955 or http://dx.doi.org/10.2139/ssrn.1603955

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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