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Competition Policy for High Technology Industries

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  • Stephen Martin*

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Abstract

I model optimal product-market competition policy when industriesdiffer inthe potential for quality-improving technological advance. In a two-periodmodel, a competition authority with limited resources administers adeterrence-based competition policy toward two industries. In one oftheindustries, an incumbent firm chooses the level of resources toinvest in aquality-improving R&D project. In the other industry, product qualityisconstant. The competition authority cannot commit in advance to thetoughness of competition policy in the post-discovery world. Optimalpolicy requires the competition authority to administer a toughercompetition policy before innovation, all else equal, the greater thepotential quality improvement; patent protection may increase R&Dintensity, but worsens market performance.
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Suggested Citation

  • Stephen Martin*, 2001. "Competition Policy for High Technology Industries," Journal of Industry, Competition and Trade, Springer, vol. 1(4), pages 441-465, December.
  • Handle: RePEc:kap:jincot:v:1:y:2001:i:4:p:441-465
    DOI: 10.1023/A:1019527211183
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    References listed on IDEAS

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    1. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
    2. Souam, Said, 2001. "Optimal antitrust policy under different regimes of fines," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 1-26, January.
    3. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    4. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
    5. Jensen, Richard & Showalter, Dean, 2004. "Strategic debt and patent races," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 887-915, September.
    6. Stephen Martin, 1998. "Product market competition policy and technological performance," CIE Discussion Papers 1998-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    7. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1996. "Optimal Patent Design and the Diffusion of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 60-83, Spring.
    8. Waterson, Michael, 1990. "The Economics of Product Patents," American Economic Review, American Economic Association, vol. 80(4), pages 860-869, September.
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    Cited by:

    1. Afonso Planas Raposo de Almeida Costa & Pedro Barros, 2012. "Does a Tougher Competition Policy Reduce or Promote Investment?," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 119-141, March.
    2. Fritz Breuss, 2003. "Austria, Finland and Sweden in the European Union," WIFO Monatsberichte (monthly reports), WIFO, vol. 76(7), pages 529-556, July.

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