US antitrust policy takes as its objective consumer welfare, not total economic welfare. With that objective, Joe Bain's definition of entry barriers is more useful than George Stigler's or definitions based on economic welfare. It follows that economies of scale that involve sunk costs may create antitrust barriers to entry. A simple model shows that sunk costs without scale economies may discourage entry without creating an antitrust entry barrier.(This abstract was borrowed from another version of this item.)

A half-century ago, Joseph Schumpeter (1950 Chapters 5–8) presented a vision of modern capitalism in which monopolies are common but frequently swept aside by a “perennial gale of creative destruction” (p. 84). This gale is driven not by price competition, but by “competition from the new commodity, the new technology ... competition which strikes not at the margins of the profits of the existing firms but at their foundations and their very lives” (p. 84). I focus here on the personal-computer (PC) software (hereafter simply “software”) industry, which resembles this vision. I discuss some important issues this industry poses for antitrust policy and, in the final section, illustrate with examples from the Microsoft case.

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My assignment here is to assess the implications of recent theoretical work in industrial economics for antitrust in the United States. I don't have space enough to present a comprehensive survey of that work, nor even to catalog all recent developments with apparent antitrust implications. I attempt instead to describe the general character of those implications, limiting myself to a few illustrative specifics. Industrial economics affects antitrust policy in three different ways. First, it is used in positive analysis aimed at determining whether or not current law has been violated in specific cases and at assessing damages due injured parties. Second, it should be used in evaluating the desirability of relief that might be imposed in particular cases in order to alter structure or conduct if a violation is found. Finally, the tools and results of industrial economics are important inputs in the formulation of general rules of law. I argue here that the new industrial economics can contribute a lot to the positive analysis of individual cases, but it has much less to say about the desirability of particular relief or of general rules of law. A final section briefly examines some implications of this situation.