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Antitrust in Innovative Industries

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Author Info
Ilya Segal
Michael Whinston
Abstract

We study the effects of antitrust policy in industries with continual innovation. A more protective antitrust policy may have conflicting effects on innovation incentives, raising the profits of new entrants, but lowering those of continuing incumbents. We show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed. We apply this framework to analyze several specific antitrust policies. We show that in some cases, holding the innovation rate fixed, as suggested by our comparative statics results, the tension does not arise and a more protective policy necessarily raises the rate of innovation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11525.

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Date of creation: Aug 2005
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Handle: RePEc:nbr:nberwo:11525

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Find related papers by JEL classification:
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May. [Downloadable!] (restricted)
  2. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January. [Downloadable!] (restricted)
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  3. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March. [Downloadable!] (restricted)
  4. Stein, Jeremy C, 1997. "Waves of Creative Destruction: Firm-Specific Learning-by-Doing and the Dynamics of Innovation," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 265-88, April. [Downloadable!] (restricted)
  5. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  6. Robert M. Hunt, 2004. "Patentability, Industry Structure, and Innovation," Journal of Industrial Economics, Blackwell Publishing, vol. 52(3), pages 401-425, 09. [Downloadable!] (restricted)
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  7. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March. [Downloadable!] (restricted)
  8. Richard J. Gilbert and Michael L. Katz., 2001. "An Economist's Guide to U.S. v. Microsoft," Economics Working Papers E01-300, University of California at Berkeley. [Downloadable!]
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  1. Norbäck, Pehr-Johan & Persson, Lars & Vlachos, Jonas, 2006. "Entrepreneurial Innovations, Competition and Competition Policy," Working Paper Series 670, Research Institute of Industrial Economics. [Downloadable!]
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