Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries

68 Pages Posted: 5 May 2001 Last revised: 1 Jan 2014

See all articles by Richard Schmalensee

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

David S. Evans

Global Economics Group; University College London

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001

Abstract

Competition in many important industries centers on investment in intellectual property. Firms engage in dynamic, Schumpeterian competition for the market, through sequential winner-take-all races to produce drastic innovations, rather than through static price/output competition in the market. Sound antitrust economic analysis of such industries requires explicit consideration of dynamic competition. Most leading firms in these dynamically competitive industries have considerable short-run market power, for instance, but ignoring their vulnerability to drastic innovation may yield misleading conclusions. Similarly, conventional tests for predation cannot discriminate between practices that increase or decrease consumer welfare in winner-take-all industries. Finally, innovation in dynamically competitive industries often involves enhancing feature sets; there is no sound economic basis for treating such enhancements as per se illegal ties.

Suggested Citation

Schmalensee, Richard and Evans, David S., Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries (May 2001). NBER Working Paper No. w8268. Available at SSRN: https://ssrn.com/abstract=268877

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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David S. Evans (Contact Author)

Global Economics Group ( email )

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University College London ( email )

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