Can Governments Promote Competition? Some Reflections About the Knowledge Limitation of Regulators for Undertaking Competition Policy Enforcement

Abstract

This paper offers some reflections about the adequacy of the conventional Industrial Organization view in providing a positive explanation of market behavior and economic causalities leading firms to undertake business strategies deemed as "restrictive". We explore the convenience of using this view as a normative yardstick for enforcing competition policy in a predictable way. This stems from the inability of this view in providing knowledge to the regulator, so to undertake his regulatory activity in a regular, predictable way. After exposing the intrinsic flaws of the conventional view, we propose an alternative perspective, based on the notion of network competition, which is rooted in the Austrian Economics understanding of market process, capable of guiding government initiatives for the promotion of competition.

Keywords: antitrust economics, new learning of industrial organization, network competition, rule of law, institutions, economic and institutional development, market power, entry barriers, Austrian Economics, Kirzner, Freedom of entry