American Economic Review Vol. 97 No. 5 2007

Antitrust in Innovative Industries

Ilya Segal¹; Michael D. Whinston²

¹ Stanford University, Department of Economics, 579 Serra Mall, Stanford, CA 94305-6072. · ² Northwestern University, Department of Economics, 2003 Sheridan Road, Evanston, IL, 60208-2600.

Abstract

We study the effects of antitrust policy in industries with continual innovation. Antitrust policies that restrict incumbent behavior toward new entrants 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 also show that, in some cases, the tension does not arise, and policies that protect entrants necessarily raise the rate of innovation.

DOI

10.1257/aer.97.5.1703

Volume

97

Issue

5

Pages

1703-1730

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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