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Competition Policy for High Technology Industries

Author

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  • Stephen Martin

    (University of Amsterdam)

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.

Suggested Citation

  • Stephen Martin, 2000. "Competition Policy for High Technology Industries," Tinbergen Institute Discussion Papers 00-010/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20000010
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    Cited by:

    1. is not listed on IDEAS
    2. Fritz Breuss, 2003. "Österreich, Finnland und Schweden in der EU. Wirtschaftliche Auswirkungen," WIFO Monatsberichte (monthly reports), WIFO, vol. 76(7), pages 529-556, July.
    3. 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.

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