Cumulative Innovation and Antitrust Policy

25 Pages Posted: 28 May 2011

See all articles by Alexander Raskovich

Alexander Raskovich

U.S. Department of Justice - Economic Analysis Group

Nathan Miller

Georgetown University - Robert Emmett McDonough School of Business

Date Written: April 1, 2011

Abstract

We develop a stylized model of a Schumpeterian industry, characterized by cumulative innovation and a succession of incumbent monopolists, to address issues in competition policy toward abuse of dominance. Incumbents’ R&D investments increase future social surplus flows as well as the incumbents’ tenure in the market, thus generating both positive and negative intertemporal externalities. We find that conduct that appropriates surplus (“extraction”) increases innovation and surplus growth. By contrast, conduct that lengthens incumbent tenure (“extension”) increases innovation and surplus growth when the net intertemporal externality is positive but decreases innovation and surplus growth when the net intertemporal externality is negative.

Keywords: innovation, antitrust policy, single-firm conduct

JEL Classification: L40

Suggested Citation

Raskovich, Alexander and Miller, Nathan, Cumulative Innovation and Antitrust Policy (April 1, 2011). Available at SSRN: https://ssrn.com/abstract=1853584 or http://dx.doi.org/10.2139/ssrn.1853584

Alexander Raskovich

U.S. Department of Justice - Economic Analysis Group ( email )

450 Fifth St. NW
Room 9418
Washington, DC 20530
United States
202-307-6606 (Phone)
202-514-5847 (Fax)

Nathan Miller (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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