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Antitrust in Innovative Industries

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  • 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.

Suggested Citation

  • Ilya Segal & Michael Whinston, 2005. "Antitrust in Innovative Industries," NBER Working Papers 11525, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11525
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    References listed on IDEAS

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    1. Richard J. Gilbert & Michael L. Katz, 2001. "An Economist's Guide to U.S. v. Microsoft," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 25-44, Spring.
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    12. repec:aei:rpbook:53444 is not listed on IDEAS
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    More about this item

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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