The Relevance for Antitrust Policy of Theoretical and Empirical Advances in Industrial Organization

Abstract

This paper discusses some of the recent theoretical and empirical advances in industrial organization over the last decade or two and explains their relevance, if any, to the analysis of antitrust problems. After discussing the very broad area of game theory, I move on to discuss some specific areas where theory has improved our understanding of certain industry practices, such as strategic behavior, raising rivals' costs and tie-ins. I also discuss some provocative work by Sutton that links high concentration to fierce competition. On the empirical side, I discuss some breakthroughs in structural demand estimation, merger simulation, and in the modeling of entry and exit. In the discussions of these new theoretical and empirical results, I highlight their likely relevance for antitrust practitioners.

Keywords: Antitrust and Industrial Organization

JEL Classification: L00, L40