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Beyond Schumpeter vs. Arrow: How Antitrust Fosters Innovation
Abstract
The relationship between competition and innovation is the subject of a familiar controversy in economics, between the Schumpeterian view that monopolies favor innovation and the opposite view, often associated with Kenneth Arrow, that competition favors innovation. Taking their cue from this debate, some commentators reserve judgment as to whether antitrust enforcement is good for innovation. Such misgivings are unnecessary. The modern economic learning about the connection between competition and innovation helps clarify the types of firm conduct and industry settings where antitrust interventions are most likely to foster innovation. Measured against this standard, contemporary competition policy holds up well. Today's antitrust institutions support innovation by targeting types of industries and practices where antitrust enforcement would enhance research and development incentives the most. It is time to move beyond the "on-the-one-hand Schumpeter, on-the-other-hand Arrow" debate and embrace antitrust as essential for fostering innovation.
... An intent of the indicators indicates acclaim for Arrow, in that a competitive product market allows new entrants to challenge incumbents, e¢ cient …rms to grow and ine¢ cient ones to exit, so that boosting economic growth. However, concerning a practical issue of how competition policy including antitrust fosters innovation, the great divide still remains unsolved in industrial organization or economic growth …elds on roles of antitrust policy (Shapiro, 2012; Baker, 2007). Especially, as Baker(2007) suggested from a viewpoint of the law and economics, "antitrust is not a general-purpose competition intensi…er. ...
... However, concerning a practical issue of how competition policy including antitrust fosters innovation, the great divide still remains unsolved in industrial organization or economic growth …elds on roles of antitrust policy (Shapiro, 2012; Baker, 2007). Especially, as Baker(2007) suggested from a viewpoint of the law and economics, "antitrust is not a general-purpose competition intensi…er. Rather, antitrust intervention can be focused on industry setting and categories of behavior where enforcement can promote innovation."(p.589). ...
... For example, while the critics rigidly assume that innovation always increases with the number of competitors, the antitrust literature offers much more nuanced perspectives on the complex interplay between innovation and market concentration. 123 Antitrust likewise recognizes that placing a value 1 3 on innovation can cut either for or against aggressive antitrust enforcement, depending on the context. For example, competition for a market, rather than traditional competition in a market, has produced some of the greatest innovations of the digital age. ...
Critics from both the right and the left claim that modern antitrust doctrine, rooted in consumer welfare, is inadequate to handle the challenges of the twenty-first century economy. They express nostalgia for 1960s antitrust, when the field had no clear objectives and cases were decided on impressionistic notions of “fairness” and good corporate citizenship. This article exposes the intellectual void at the heart of this new populist movement and begins by following Justice Holmes’ tenet that “a page of history is worth a volume of logic.” More than 80 years ago, the A&P grocery chain was a vertically integrated retailer that made use of unprecedented scale and innovation to offer consumers a wider range of products than the competition and at lower prices. Yet A&P’s very success, which came at the expense of smaller and less efficient competitors, triggered a backlash: first from Congress, in the form of the Robinson–Patman Act, and then from the Justice Department, in the form of successful prosecution under the Sherman Act. These attacks on A&P bear an eerie resemblance to attacks today on leading online innovators. Increasingly integrated and efficient retailers—first A&P; then “big box” brick-and-mortar stores; and now online retailers—have challenged traditional retail models by offering consumers lower prices and greater convenience. For decades, critics across the political spectrum have reacted to such disruption by urging Congress, the courts, and the enforcement agencies to stop these American success stories by revising antitrust doctrine to protect small businesses rather than the interests of consumers. Using antitrust law to punish pro-competitive behavior makes no more sense today than it did when the government attacked A&P for offering consumers too good a deal on groceries. In addition, antitrust doctrine does not need an overhaul. It is shaped by many economic perspectives, follows no one “School,” and is flexible enough to address any monopoly abuses in today’s economy. It is also well-calibrated to serve its central function: promoting consumer welfare. It does so not only by prohibiting conduct that harms consumers in the long run, but also by avoiding interference with conduct that might appear problematic to non-economists but that demonstrably benefits consumers over time. Antitrust remains a work in progress, but it is far superior to any alternative that the critics propose.
... The competition between organizations is a powerful incentive for the entrepreneurs to take measures, with the intention of attracting clients, and the most relevant initiative is to keep prices low. Another incentive for the consumer is improvements in the product, that is, the innovations (Baker, 2007). If the innovation improves the well-being of the user and has significant value, it makes sense to consider the effect of the public policy in innovation for the user. ...
The purpose of this article was to identify the innovations developed at the Port of Rio Grande, according to the dimensions of the Oslo Manual, related to environmental management in the period 2010–2012. It also analyzed whether the possible innovations developed by the port relate to the assessment requirements of environmental management, proposed by ANTAQ. For this, we used a type of qualitative content analysis, with in-depth interviews applied to a population of thirty port managers, and a quantitative study which sought to examine whether the innovations obtained are related to the assessment requirements of environmental management. As a result, 45 innovations were identified, these being classified according to the Oslo Manual in: 2 product innovations; 14 process innovations; 5 marketing innovations; and 24 organizational innovations. Considering the frequency of occurrence of innovations in the sector, the requirement of ANTAQ implementing the environmental agenda presented the highest number of innovations, mainly related to process innovations.
... In addition, a competition policy intervention that prevents dominant firms from excluding innovation rivals by raising their R&D costs will necessarily increase rival investment, and will increase dominant firm investment if and only if the dominant firm regards rival investment as a strategic complement. These results are relevant to the antitrust evaluation of a dominant firm's ''appropriability'' justification for exclusionary practices: its claim that those practices will benefit innovation by increasing its own reward for innovation success and, thus, encouraging it to invest more in R&D (Baker 2016). V 1z 1 dz = 0. ...
This article evaluates the innovation consequences of antitrust enforcement against the exclusionary conduct of dominant firms through a Nash equilibrium model of research and development (R&D) competition to create new products. In the two-firm model, whether one firm regards the other’s R&D investment as a strategic complement or substitute turns on an increasing differences condition: whether the first firm’s incremental benefit of increased R&D investment is greater if its rival’s R&D effort succeeds or fails. Antitrust prohibitions on pre-innovation product market exclusion, post-innovation product market exclusion, and exclusion from R&D competition, are found to be effective in different strategic settings.
... By extend‑ ing their expertise to licensing‑in and licensing‑out, NPEs provide valuable potential for inventors, universities and companies, not only when it comes to strategic patent management but also to provide the connection between buyers and sellers. At the same time, the debate whether appropriation sti‑ fles innovation and to what extent competition enhances innovation still rages on (see Baker, 2007; Carrier, 2008; Gilbert, 2006); we are not taking a position in this, except noting that appropriation, litigation and NPEs have created dynamics that are not yet understood (see Fahimi‑Steingraeber et al., 2011). ...
This paper, exploratory by nature, raises a fundamental question regarding the relevance of Schumpeter and Schumpeterian Thought in our contemporary economy. This is done by arguing that in reading Schumpeter, we distinguish between an ‘Early’ and a ‘Later’ Schumpeter. By analyzing contemporary developments in innovation at both the firm cluster and the systems level we demonstrate how Schumpeter’s analysis is indeed still relevant. What is argued, however, is that we can observe a merging of the ‘two phases’ of Schumpeterian thought with individual businesses seeking collaboration and partnership for the entrepreneurial spark and management of the innovation process.
JEL codes: O33, L21, L26
... By extend‑ ing their expertise to licensing‑in and licensing‑out, NPEs provide valuable potential for inventors, universities and companies, not only when it comes to strategic patent management but also to provide the connection between buyers and sellers. At the same time, the debate whether appropriation sti‑ fles innovation and to what extent competition enhances innovation still rages on (see Baker, 2007; Carrier, 2008; Gilbert, 2006); we are not taking a position in this, except noting that appropriation, litigation and NPEs have created dynamics that are not yet understood (see Fahimi‑Steingraeber et al., 2011). In addition, there are some trends in terms of how larger companies protect their competitive position. ...
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... Rovnako neoklasická syntéza (neokeynesovská ekonómia) považuje technický pokrok za dôležitý faktor ekonomického rastu (Nordhaus, Samuelson, 2000). Skúmanie inovácií v rozmere makroekonómie nájdeme aj v prácach súčasných autorov (Arthur, 2009;Barro, 1991;Baker, 2007;Helpman, 2004;Langlois, 2002;Nelson, 2005;Verspagen, 1992). ...
The marketization of public services aims at a continuous increase in public expenditure efficiency, continual improvements in public services quality, the implementation of the professional management tools in the public sector, emphasis on the plurality system of ownership forms in public service delivering - public-private-civil sector mix, partnerships, cooperation and co-creation in public service delivery. In this paper we focus on the public-private-civil sector mix in creation and redesign of public spaces with strong citizen involvement in service design and production – co-creation in public service. The goal of this paper is to analyse the case of such co-creation in public service (an NGO´s Program PrieStory) in Slovak conditions and find the main drivers and barriers that account for the success or failure of co-creation processes in Slovak republic.The research leading to these results has received funding from the European Union Seventh Framework Programme under grant agreement No. 320090 (Project Learning from Innovation in Public Sector Environments, LIPSE), Socioeconomic Sciences and Humanities.
... [Baker (2007)] looked more specifically at the relationship between antitrust enforcement and innovation, although he first surveys a large number of studies of the relationship between competition and innovation. He derived four principles for the relationship between competition and innovation: (1) competition itself encourages innovation; (2) competition among producers encourages them to lower costs, improve quality, and improve their products; (3) firms that expect to face more product market competition post-innovation have less incentive to invest in research and development; and (4) the ability to discourage rivals from innovating through research and development increases the incentive for a firm to innovate. ...
Innovation is a critical component of sustained economic growth, so the effect of government regulation on the initiation and implementation of innovation is a key measure of its effectiveness and appropriateness. This paper examines the effect of the Federal Communications Commission's broadcast ownership regulations on the implementation of a relatively recent innovation, multicasting of broadcast television signals, and on the intensity with which broadcasters use the spectrum available to them. I study the factors influencing market-level multicasting and find that Federal Communications Commission (FCC) broadcast ownership regulations have little to no effect on the spread of this innovation, although one regression may indicate that the existing regulations support increased intensity of innovation. Rather, the implementation of this innovation is driven by the number of stations, particularly the number of commercial television stations and PBS stations, and is affected to some extent by the size of the market and competition from multichannel video providers.
... 14 Katz and Shelanski (2006) provide a useful review of the research in the context of merger enforcement. The theoretical controversy arises because competition can also be a spur to innovation (Baker, 2007). Arrow (1962) noted that competitive industries might be more innovative as far as cost reductions are concerned because they have a greater level of output over which cost reductions may be realized. ...
A recent criticism of competition policy is that antitrust authorities shouldn't focus their concern on prices, since the welfare losses of prices are trivial compared to longer run innovation effects. At minimum, there's a problematic trade-off between so-called static price and dynamic efficiencies. On this view, if there is a credible argument supporting the idea that collusion or merger increases incentives to innovate, one should not worry about price. We entertain here the hypothesis that antitrust should not worry about innovation, just as it should not worry about effects on other markets. Antitrust takes place in the shadow of patent laws, which presumably have evolved to provide efficient innovation incentives when markets are competitive, as most are. To weaken antitrust enforcement presumes that patent law is not set correctly. A better remedy would be to adjust patent law and other tools for encouraging innovation, e.g., tax credits or prizes. To distort the application of antitrust law to fix shortcomings in patent law provides a correction only if there is a potential antitrust violation (e.g., an otherwise anticompetitive merger) to ignore. Sectors with no antitrust "events" would remain uncorrected.
... Instead, it is very likely that there was not enough competition intensity (too much concentration ) in the past and more competitive pressure drives technological progress. This corresponds to modern insights in economics that view competition as the major and indispensable driving-force of technological competitiveness (Kerber 2006Kerber , 2010 Baker 2007 Baker , 2008) was almost constant during recent years. In general, innovative activity appears to be located mostly in larger firms disposing of resources to finance R&D expenditures . ...
Although Russia's WTO-accession is foreseeable, there are still deficits in the literature on its concrete effects on the sectoral and regional levels. In this paper we analyze effects on Russia's chemical and petrochemical sectors (CPS), which are, unlike for example its oil and mineral gas industry, rarely in the focus of public attention. On the basis of an extensive examination of these sectors' current condition, we expect serious problems for them to emerge in the nearer future, the perhaps most serious and most puzzling problem being under-investment. Our analysis is based on data provided by GOSKOMSTAT/ROSSTAT, Russia's official statistics institute.
The aim of this paper is to explore the interaction between innovation and competition in internet-based SMEs and to identify key factors influencing innovation. The author investigates how competition impacts industry innovation by analyzing product market dynamics and conducting a comprehensive survey asking industry experts about the challenges that hinder innovation and competition. Additionally, the study reviews various models and case studies to understand how competition drives innovation. The findings suggest that increased competition enhances productivity across multiple industries. The author also provides policy recommendations to support innovation and competition, which are crucial for regulators aiming to boost these elements in small and medium-sized internet-based enterprises. This paper offers valuable insights into the relationship between innovation and competition and proposes actionable policies to promote both.
Economists have argued that there are particular characteristics of online markets, and the pricing structure and models have to be understood differently from traditional one-sided offline markets. The predominant features of innovation and dynamic efficiency, indirect network effects in a multi-sided market, the savings of transaction costs, information costs, the lock-in effects that consumers have to suffer and the costs of attention given in the nonprice competition. This chapter discusses those characteristics and the implications for competition law. It presents the tension of encouraging innovation and protecting consumers’ privacy and the unsolved economic debate on whether antitrust scrutiny and intervention are necessary when there is sufficient competition between the users of the platform. The next chapter will continue the debate by focusing on the use of data and will discuss the characteristics of data and how data monopolies raise antitrust concerns.
This article discusses the assessment of horizontal mergers and harm to innovation when there is innovation competition. The goal is to build a scheme for the proper choice of the framework of analysis, presenting, for each situation: mechanisms to identify innovation competition, to undertake market definition, to assess the competitive significance of firms, identification of the appropriate theories of harm and evidence. We review the literature on Competition Policy and on Economics of Innovation and take examples from the US and European case law. We also briefly discuss the strategic management literature to provide insights for the assessment. Considering post-merger reductions on innovation incentives as harm to innovation, we find differences of traditional merger procedure adequacy and challenges to build evidence, considering three faces of innovation, including possible combinations of these faces within a same merger case: (i) incremental innovation efforts in the product market, (ii) ongoing efforts for developing new products and (iii) future innovation efforts. When the traditional merger procedure is inadequate, we argue in favor of using a capabilities-based assessment, changing the step-by-step procedure.
Background
The detrimental impact of dominant corporations active in health-harming commodity industries is well recognised. However, to date, existing analyses of the ways in which corporations influence health have paid limited attention to corporate market power. Accordingly, the public health implications of concentrated market structures, the use of anti-competitive market strategies, and the ways in which market power mediates the allocation and distribution of resources via market systems, remain relatively unexplored. To address this gap, this paper aimed to identify and explore key literature that could inform a comprehensive framework to examine corporate market power from a public health perspective. The ultra-processed food (UPF) industry was used to provide illustrative examples.
Methods
A scoping review of a diverse range of literature, including Industrial Organization, welfare economics, global political economy and antitrust policy, was conducted to identify important concepts and metrics that could be drawn upon within the field of public health to understand and explore market power. The Structure-Conduct-Performance (SCP) model, a guiding principle of antitrust policy and the regulation of market power, was used as an organising framework.
Results
We described each of the components of the traditional SCP model and how they have historically been used to assess market power through examining the interrelations between the structure of industries and markets, the conduct of dominant firms, and the overall ability of markets and firms to efficiently allocate and distribute the scarce resources.
Conclusion
We argue that the SCP model is well-placed to broaden public health research into the ways in which corporations influence health. In addition, the development of a comprehensive framework based on the key findings of this paper could help the public health community to better engage with a set of policy and regulatory tools that have the potential to curb the concentration of corporate power for the betterment of population health.
This article discusses the rapid formation of the Rule of Reason (ROR) approach in antitrust policy in the field of anti — competitive agreements. In many countries (the US, EU) there was a significant reduction of the use of per se approach (prohibition on the base of formal characteristics) in favor of the ROR approach, nowadays agreements are usually permitted or prohibited on the basis of the analysis of positive and negative effects. The article analyzes and summarizes the experience of these jurisdictions in the development of the ROR approach, the chronology for agreements of various types (horizontal, vertical agreements). The role of discussions in economic theory in this process was provided the argumentation for the expansion of effects evaluation. At the same time, the article examines the problems of this transformation, taking into account the problems of legal uncertainty, growing risks of type 2 errors.
Empirical work on the influence of competition policy relies on the construction of indicators for measuring certain attributes of the relevant laws and institutions that can be hypothesized to influence the “quality” of these laws and institutions and hence their effect on competition and economic performance. This paper contributes to the methodological literature on indicators of the quality of Competition Law Institutions & Enforcement (CLI&E) and to the empirical literature relating to the measurement of these indicators in different countries. It presents the results of a recent empirical study, which objective has been to measure indicators of the quality of CLI&E, using data collected through a Questionnaire based survey of competition authorities in a large number of countries and data available from international organisations for these countries. The measurement of the indicators relies on a new methodology that focuses on the factors influencing the extent to which CLI&E improves competition and so enhances economic performance. The overall conclusion is that the three BRICS countries included in our survey (Brazil, Russia and South Africa) are coming closer to the advanced jurisdictions in terms of the specific features of the countries’ institutional and legislative set-up relating to CLI&E but still lag far behind in terms of the general conditions (economic, political, institutional, and socio-cultural) influencing the intensity of competition in a country.
Zusammenfassung
Das Instrument der Ministererlaubnis ist ein viel diskutierter Sonderfall in der deutschen Wettbewerbspolitik, bei welchem der Bundeswirtschaftsminister einen vom Bundeskartellamt (BKartA) untersagten Zusammenschluss bei Vorliegen besonderer Gründe im Nachhinein doch noch erlauben kann. Im vorliegenden Beitrag werden sowohl die Ausgestaltung, als auch die Sinnhaftigkeit des Instrumentes an sich aus ökonomischer Sicht beleuchtet, indem zunächst die im Gesetz verankerten Gründe für eine Erlaubnis auf einen Konflikt mit dem Schutz des Wettbewerbs, als übergeordnete Aufgabe des BKartA, untersucht werden. Nach einer Analyse der bisherigen 22 Fälle Zum Zeitpunkt der Beitragsannahme im Jahr 2018 war die hier angegebene Zahl aktuell und damit auch die weitere Analyse der Fälle und Gründe vollständig. Seit Mai 2019 gibt es nun mit Miba/Zollern einen weiteren Ministererlaubnis-Fall, welcher hier jedoch logischerweise nicht berücksichtigt werden konnte.
, bezogen auf die jeweiligen Begründungen und Erfolge, werden abschließend fünf Möglichkeiten zur Novellierung des Instrumentes diskutiert. Dabei kommen die Autoren zu dem Schluss, dass eine Anpassung des Gesetzes, sowohl hinsichtlich des entscheidenden Gremiums, als auch bezüglich der zulässigen Begründungen für eine Ministererlaubnis, notwendig wäre, um das Bestehen des Instrumentes wohlfahrtsökonomisch rechtfertigen zu können.
Purpose
Technical progress is an important technique within improving China’s comparative advantages, as new and renewable technologies will be beneficial for energy security. Productive technical progress and green technical innovation are necessary to improve working conditions and productivity of industries. Therefore, the purpose of this paper is to study technical progress in China under such harsh competitive circumstances, as well as types of technical progress that can be promoted, productive technical progress or green technology progress, and how technical progress will affect China’s competitive advantages.
Design/methodology/approach
The authors perform a multi-index multi-factor constitutive model based on a sample of 468 Chinese industries, and divide the industries into four categories.
Findings
The results indicate that there is a “U”-shape relationship between green technology progress and comparative advantages and an inverted “U”-shape relationship between the intensity of market competition and comparative advantages.
Research limitations/implications
China has crossed the inflection point of the “U”-shaped curve. This, coupled with the slowing of economic growth, demonstrates the need for advocating green technology in China to decrease the pollutant discharge. Establishing Chinese national brands within overseas markets and earning a profit through the downstream of production chain enhance China’s international competitiveness.
Originality/value
One of the most original findings of this paper points out that China is faced with a situation in which exports are severely decreased and domestic environment pollution is increased. Vigorous promotion of green technology progress, improvement of the quality and the technical content of exported products, the establishment of national brand within the overseas market, as well as enhancement of China’s international competitiveness, is needed.
Now that traffic volumes are increasing rapidly, the cost of expanding capacity has become a large portion of expenditures for Mobile Network Operators (MNOs). This paper uses an engineering-economic model to show that there are strong economies of scale when expanding capacity, because an MNO with more spectrum benefits more from every new cell tower, and an MNO with more towers benefits more from every new MHz of spectrum. While it is technically possible to expand capacity by increasing either towers or spectrum holdings, we find that the cost-effective approach is to increase both types of assets at a similar rate. In the absence of countervailing policies, the big MNOs are well positioned to get bigger, in terms of spectrum holdings, towers, and ultimately market share. For policymakers, this economy of scale creates a trade-off between two important objectives: reducing the cost of cellular capacity, and increasing competition. This paper derives the Pareto optimal division of spectrum with respect to these two competing objectives, and shows that any Pareto optimal assignment will split the spectrum fairly evenly among competing MNOs. This is not simply a method of ensuring that there are many competitors; spectrum should be divided fairly evenly regardless of whether the number of competitors is large or small. A large disparity in spectrum holdings may yield poor results with respect to both objectives, i.e. the lower cost-effectiveness of a larger number of MNOs, and the lower competitive pressure of a smaller number of MNOs. One effective way to achieve a division of spectrum that is close to Pareto optimal is a spectrum cap, provided that this cap is set at a level consistent with other policies and policy objectives, including antitrust policy.
We analyze the impact of a merger on firms' incentives to innovate. We show that the merging parties always decrease their innovation efforts post-merger while the outsiders to the merger respond by increasing their effort. A merger tends to reduce overall innovation. Consumers are always worse off after a merger. Our model calls into question the applicability of the 'inverted-U' relationship between innovation and competition to a merger setting.
The purpose of this chapter is twofold: to test whether the policy expectations are realistic and to identify under which economic conditions PCP can be expected to be effective. To this end, I will compare the policy expectations assumptions against authoritative economic theories and studies, beyond those commissioned by the EU policy-makers.
Consistent with its goals of encouraging innovation and enhancing consumer welfare, antitrust law generally does not compel a firm to give access to the very assets that are the source of a firm's competitive advantage, including a firm's intellectual property, unless a firm has illegitimately gained some edge in the market. And yet, in the context of merger review, compulsory licenses are a fairly common remedy. The Federal Trade Commission and Department of Justice do not impose a compulsory license in every case, but the principles guiding the decision are not entirely clear. This Article is suspicious of the benefits of a compulsory license and concerned about the costs. Ultimately, the agencies use compulsory licenses as a remedial tool to change the post-merger market dynamics. Although a remedial compulsory license may achieve the goal of restoring competition lost as a result of the merger, it may also undermine the merged firm's incentives to innovate. This may undo the very benefits and efficiencies the merger hoped to achieve. To take account of the uncertain effects of a compulsory license, this Article suggests the agencies adopt a decision-theoretic approach to the remedy phase of a merger analysis. The Horizontal Merger Guidelines issued in 2010 adopt an approach for reviewing mergers consistent with a decision-theoretic approach. But that process stops short of considering the potential effects of a proposed remedial mechanism. This Article recommends that the agencies extend the decision-theoretic analysis implicit in the revised Merger Guidelines and include consideration of the possible outcomes that can result if a potential remedy is chosen, the likelihood of those outcomes, as well as the magnitude of harm and benefits that will follow if those outcomes should come to pass. A decision-theoretic approach will enable the reviewing agency to take better account of the potential, but uncertain, outcomes of a potential remedy. Moreover, such an approach will discipline the agencies' decisionmaking processes, ensuring that remedies are imposed only when they are actually likely to benefit consumers.
'Law and economics has become a dominant way of thinking about trade mark law in the United States. In this book, Andrew Griffiths applies the methodology of law and economics to European trade mark law in a comprehensive and thoughtful fashion, giving us new insights into the nature of European trade mark legislation and the case law that has developed under it.'
Antitrust agencies around the world are increasingly focusing on digital industries. Critics have justifiably questioned the ability of competition agencies to make beneficial enforcement decisions given the complexity and rapid pace of change in online markets. This Article discusses those criticisms and addresses the argument that, because the error costs of overenforcement of antitrust laws in digital markets would be much higher than the error costs of underenforcement, courts and antitrust agencies should presume against antitrust intervention in digital industries. While acknowledging that there is often good reason for such modesty in enforcement, this Article discusses several ways in which competition policy can adjust to better account for potential costs and benefits of enforcement in digital platform markets. It argues that nonprice effects related to information and innovation are particularly important to the performance of online platforms, and may hold the key to a better understanding of the costs of antitrust underenforcement and the assessment of the competitive effects of conduct and transactions in digital industries.
In industries with large sunk costs, the investment strategy of competing firms
depends on the regulatory context. We consider ex-ante industrial policies in which the
sunk cost may be either taxed or subsidized, and antitrust policies which could be either pro-competitive (leading to divestiture in case of high ex-post profitability) or lenient (allowing mergers in case of low ex-post profitability). Through a simple entry game we completely characterize the impact of these policies and examine their associated dynamic trade-offs between the timing of the investment, the ex-post benefits for the consumers, and the possible duplication of fxed costs. We find that merger policies are dominated by ex-ante industrial policies, whereas the latter are dominated by divestiture policies only under very special circumstances.
Industries with technological standards can be highly competitive and innovative. The modern approach to Innovation Economics
understands that technology standards, the competitive conduct of firms, and the economic performance of innovative industries
are endogenous and jointly determined. Market competition and standards organizations endogenously determine technology standards,
which are consistent with innovative efficiency. This contrasts with traditional Innovation Economics, which can be summarized
as a “Standards-Conduct-Performance” paradigm. The traditional view, which is reminiscent of the traditional Industrial Organization
“Structure-Conduct-Performance” paradigm, incorrectly assumes that technology standards are exogenous and cause imperfectly
competitive conduct and inefficient economic performance. Instead, studies of innovation should apply game-theoretic models
that account for strategic interaction and empirical tools that control for the interplay among technology standards, competitive
conduct, and economic performance.
Despite marked parallels in the language of their antitrust laws and the increasing use of economic expertise in developing
agency positions, the United States and the European Union exhibit strong continuing differences in competition policy. This
is especially true in policy towards what is called “the new economy” or “dynamically competitive industries.” This article
first explicates a recurring pattern that typifies much of the new economy and identifies intellectual property interacting
with network effects as the central dynamic. In some critical industries, this interaction generates a uniquely powerful,
but also uniquely vulnerable, competitive situation. Transatlantic policy differences towards dynamically competitive industries
are documented, and the roots of those differences are explored in three dimensions: institutions; ideology and doctrine;
and economic nationalism.
Competition and intellectual property (IP) protections are complements in stimulating innovation. When IP is appropriable, a market for inventions forms and competitive pressures increase incentives to innovate. Competition among producers, the demand side of the market for inventions, and competition among inventors, the supply side of the market for inventions, create incentives to innovate. When IP is not fully appropriable, markets for inventions are limited and competitive pressures can decrease incentives to innovate. Firms vertically integrate R&D and production and share technology to appropriate the returns to IP. This implies that antitrust policy and IP protections are complements.
'This book brings to bear Professor Maggiolino's considerable skills as a comparative competition law scholar on what is perhaps the single most important competition policy issue facing us today - namely, how to use IP policy and competition policy in tandem to further both economic competition and competition in innovation. Professor Maggiolino's book covers a large range of IP practices by dominant firms where competition law can be invoked, including 'sham' litigation and product design, improper infringement actions, predation, and refusals to license. This book is well researched, well written, and completely up to date. Every serious competition law/antitrust and intellectual property scholar and practitioner should regard it as 'must' reading.'
- From the foreword by Herbert Hovenkamp, University of Iowa, US
Changing market conditions stimulate modernization of criteria, norms and standards of competition regulation and methods of enforcement. Competition advocacy is a type of activity exercised by antimonopoly authorities to strengthen competitive environment without enforcement measures, through developing active cooperation with other government bodies and increasing the degree of understanding of the benefits of competition by the community.
'Opportunity' is a central concept in entrepreneurship research, and this Article explores the relationship between law and entrepreneurial opportunities. We adopt the widely held view that entrepreneurial opportunities are ideas created by entrepreneurs, rather than resources waiting to be discovered. Of course, as with all products of the imagination, entrepreneurial opportunities draw on existing resources for inspiration, and we contend that some legal systems are better than other legal systems at encouraging entrepreneurs to think about existing resources in new ways. We also contend that when entrepreneurial opportunities are exploited, the inventory of resources expands, thus laying the foundation for the creation of more entrepreneurial opportunities. This 'opportunity cycle' leads to plentiful and continuous opportunity creation.Legal rules play an important role in each stage in the opportunity cycle, and two sets of stories told about law are foundational to innovation research. The first is that property rights (i.e., rights to exclude) are essential in the development of innovative resources because property rights assure market participants that they can retain many of the benefits of their success. The second is that various sets of legal rules – including laws limiting barriers to entry, bankruptcy laws, and corporate laws relating to limited liability and asset partitioning – reduce the costs of entrepreneurial action and failure, thus emboldening entrepreneurs to exploit opportunities. Our thesis is that all of these stories are part of a grander tale about the opportunity cycle, and the central theme of that tale is that the promotion of entrepreneurial action is a fundamental value of the U.S. legal system, the expression of which through positive law inspires entrepreneurs to create more opportunities.
This article examines the roles of economics and politics in U.S. antitrust from several perspectives. It explains why the modern debate over the economic welfare standard that enforcers and courts should pursue is unsatisfying. It connects economics and politics by describing antitrust’s economic goals as the product of a mid-20th century political understanding about the nature of economic regulation that has continued in force to this day. To protect that understanding, it explains, antitrust rules should now be implemented using a qualified consumer welfare standard. The article also identifies contemporary political tensions that threaten to create regulatory gridlock, or even to undermine the political understanding, and uses that framework to sketch several possible futures for competition policy. The article concludes with a comment on the indispensable role of economics in shaping and applying modern antitrust.
One of the most interesting and challenging phenomena of our information age is the rapid and significant change that takes place in high-technology industries. This change is shaking some of our assumptions regarding the role of technology (e.g., endogenous or exogenous), productions methods (e.g., commercial entities vs. social communities), markets (e.g., product or innovation markets), market characteristics (e.g., network industries, faster information transfer to market players and consumers), and non-market management systems. . It requires us to recognize the effects of such changes on the economic environment and to ensure that our regulatory tools secure the positive welfare effects that such changes can bring about. The papers in this special issue of the Journal of Competition Law and Economics attempt to meet this two-pronged challenge and shed light on the implications of changes in the marketplace for both the market's invisible hand and the government's visible one. In particular, they address the over-arching concerns expressed by some commentators that competition law may not be sufficiently nimble or accurate to detect and remedy competition violations in more innovative industries.
The degree of divergence between U.S. and European case law on the proper legal treatment of loyalty rebates is larger than in almost any other field of international antitrust law. Whereas U.S. jurisprudence has traditionally considered loyalty rebates to be a pro-competitive business practice, the Court of Justice of the European Union has repeatedly held that loyalty rebates are an illegal means of distorting competition. This article challenges the Community Courts’ conviction that loyalty rebates do not constitute competition on the merits and claims the opposite. The adoption of loyalty rebates is a direct consequence and a vital expression of the competitive process. The need for different forms of loyalty rebates naturally emerges from the diverse market conditions that prevail in different industries, which explains the widespread use of diverse loyalty rebates in business practice. It is the heterogeneity of commercial pressures that dominant firms are facing which determines the competitive structure and size of their rebates. By suppressing competition in rebates, orthodox legal doctrine in Europe has distorted the competitive process in a variety of global markets and thereby caused significant harm to competition and consumers. Since loyalty rebates are an efficient and healthy form of competition, plaintiffs and competition authorities that allege anti-competitive foreclosure as a result of loyalty rebates should generally carry the burden of proving the existence of a restriction of competition. The Court’s prevailing interpretation of Article 102 TFEU, by contrast, is bound to punish successful innovators and to protect less effective rivals from the inconveniences of the competitive process.
Naturally, competition policy is based on competition economics made applicable in terms of law and its enforcement. Within the different branches of competition economics, modern industrial economics, or more precisely game-theoretic oligopoly theory, has become the dominating paradigm both in the U.S. (since the 1990s Post-Chicago movement) and in the EU (so-called more economic approach in the 2000s). This contribution reviews the state of the art in antitrust-oriented modern industrial economics and, in particular, critically discusses open questions and possible limits of basing antitrust on modern industrial economics. In doing so, it provides some hints how to escape current enforcement problems in industrial economics-based competition policy on both sides of the Atlantic. In particular, the paper advocates a change of the way modern industrial economics is used in competition policy: instead of more and more case-by-cases analyses, the insights from modern industrial economics should be used to design better competition rules.
Although large buyers like Walmart and Tyson Foods occupy important positions in the American economy, antitrust law remains focused on the conduct of sellers. Moreover, when mergers of buyers have been challenged, the cases have been based on a single theory – that the merger would create a dominant buyer (or group of buyers) that would exploit small, powerless suppliers. Most powerful buyers, however, face suppliers with power of their own, and in such cases, the buyers exert “countervailing power,” which can also be anticompetitive. Yet buyer mergers that reduce competition through the exercise of countervailing power are not addressed by the government’s guidelines, the leading treatises, or the case law. This article provides a comprehensive analysis of the role of buyer power in merger enforcement. It defines the types of buyer power, describes their competitive effects, and reviews an array of evidence. It also discusses the traditional approach to buyer mergers, suggesting modifications to better reflect the true dynamics of buyer power. Most important, it recommends that courts and enforcement agencies halt mergers that enhance anticompetitive countervailing power. Because many buyer combinations that increase such power are beneficial, the article identifies ten situations in which a merger that augments countervailing power would reduce competition and diminish the welfare of consumers, suppliers, or society.
The effects of competition rules on innovation can be very far reaching and may be seen as a hindrance to one of its foundational aims; increasing consumer welfare. The aim of this discussion is to provide the reader with sufficient background knowledge of unilateral refusal to supply pursuant to Article 102 TFEU. The piecemeal legal principles show the development of this murky area. Having set the scene, it will look at one of the more prominent cases in the area; the Commission decision against Microsoft. Law and economics overlap greatly, especially where competition policy is concerned and this discussion will highlight the ongoing legal and economic debates underlying the Microsoft decision. More recent developments in the area of unilateral refusal to supply will be highlighted followed by a comparative discussion on how this area is tackled in the United States with special emphasis on the Trinko decision.
This paper is the first of a larger project aimed at exploring, among other things, whether Europe has a consistent innovation policy in the context of EU economic law (competition policy, intellectual property law, sector regulation). As such, its primary aim is to present our approach for answering this question and outline the anticipated contributions of the project. Part I of the paper sets forth the theoretical foundations of the project - namely an integrated approach to economic law that moves beyond apparent conflicts and assumes innovation as the starting point. Taking this as the foundation, the two primary components of the project are described. First, a theoretical component involving the development of an analytical grid to be used to identify ways in which economic law impacts innovation, and second an applied component that explores observable instances where choices, both implicit and explicit, are made regarding innovation in economic law. Part II of the paper builds on this and offers a preliminary illustration of the proposed analysis in the context of pharmaceuticals, specifically drug reformulation regulatory gaming.
Patents create strong incentives for collaborative development. For many technologies fixed costs are extremely high in relation to variable costs. A second feature of technology that encourages collaborative development is the need for interoperability or common standards. Third, in contrast to traditional commons, intellectual property commons are almost always nonrivalrous on the supply side. If ten producers all own the rights to make a product covered by a patent, each one can make as many units as it pleases without limiting the number that others can make. That might seem to be a good thing, but considered ex ante it may not give producers the correct incentive to develop the patented technology in the first place. In any event, product differentiation in the output market will typically be sufficient to eliminate the problem of returns that are driven to short run marginal cost. In its Bement and General Electric decisions the Supreme Court permitted the members of a patent pool to set the product price, reasoning that the protections given by the patent laws are intended to meter the correct amount of innovation, and an explicit cartel selects the same output and price as a single firm. This reasoning confuses patent value with the value of collusion in the product market. Permitting the firms to collude on product price incorrectly predicates the value of the entire cartel markup to the patents.Often patents are pooled because the problem of identifying and defending boundaries is so significant that the patents are worthless or may even have negative value. The Supreme Court alluded to this problem without specifically addressing it in its March, 2012, Mayo Clinic v. Prometheus decision. A firm will pool when the cost of identifying and defending individual boundaries exceeds the cost of forming an IP commons. Nevertheless, the social cost of using pooling to reverse the effects of worthless patents is substantial. First are the significant costs of operating an economically useless system for acquiring the patent rights in the first place. Then are the significant costs of creating and operating a pool that is designed to reverse the consequences of worthless patent grants.Under United States antitrust law no firm has a general duty to deal with rivals. One difference between refusals to share ordinary productive assets and refusals to share IP rights is that ordinary productive assets can typically be replicated by others. But a patent gives a right to the technology that it covers and makes it unlawful for rivals to duplicate that technology, even if they do so on their own.
IBM. ATT. Microsoft. Intel. IBM (redux). Google. Twitter. Facebook. All are present or former leaders in key high-tech sectors. These firms also all have been the subject of serious antitrust scrutiny over the past three decades. All have been referred to at different times as “monopolies” in the colloquial sense, and in the more technical antitrust sense, and have been the target of public and private investigations and/or litigation relating to monopolization, attempted monopolization, or the abuse of a dominant position in the United States, the European Union, the EU member states, and other jurisdictions. The goal of this essay is to focus on social networking sites as the most recent locus of these competition concerns and to create a framework to analyze the competition law concerns of social network sites. It may well be too early to definitively resolve the many antitrust issues in this rapidly evolving market, but it is not too soon to define the issues and analyze the way they will be resolved as antitrust law undertakes its traditional role of defining and limiting the abuse of market power in key high-tech industries. I also seek to create a framework to understand and evaluate from an antitrust perspective continuing issues of network effects, essential facilities, infrastructure, and their application to social network sites and related software platforms, taking into account the added complication that most of the markets in question do not currently charge consumers and exhibit features of what economists call two-sided markets. I conclude not with a call to action, but with more of a checklist of which competition law issues matter most and which represent the greatest antitrust risks faced by the current market leader Facebook as social networking continuing to evolve and grow in importance.
This paper investigates the relationship between product market competition (PMC) and innovation. A growth model is developed in which competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. There are four key predictions. First, the relationship between product market competition (PMC) and innovation is an inverted U-shape. Second, the equilibrium degree of technological neck-and-neckness' among firms should decrease with PMC. Third, the higher the average degree of neck-and-neckness' in an industry, the steeper the inverted-U relationship. Fourth, firms may innovate more if subject to higher debt-pressure, especially at lower levels of PMC. We confront these predictions with data on UK firms' patenting activity at the US patenting office. They are found to accord well with observed behavior.
Are people right to think that competition improves corporate performance? The author's investigations indicate first that there are some theoretical reasons for believing this hypothesis to be correct but they are not overwhelming. Furthermore, the existing empirical evidence on this question is weak. However, the results reported here, based on the analysis of around 670 U.K. companies, provide some support for this view. Most important, the author presents evidence that competition, as measured by increased numbers of competitors or by lower levels of rents, is associated with a significantly higher rate of total factor productivity growth. Copyright 1996 by University of Chicago Press.
This article studies the determinants of commercialization strategy for start-up innovators. We examine whether the returns on innovation are earned through product market competition or through cooperation with established firms (through licensing, alliances, or acquisition). Our hypotheses are that the relative returns to cooperation are increasing in (i) control over intellectual property rights, (ii) low transaction costs, and (iii) sunk costs associated with product market entry. Using a novel dataset of the commercialization strategies of start-up innovators, our results suggest that the procompetitive impact of start-up innovation---the gale of creative destruction---depends on imperfections in the market for ideas.
This article analyzes the effect of credible capacity limitation on the interaction between an incumbent and an entrant. The prospect of price competition deters entry by a less efficient firm with unlimited capacity. If, however, the entrant practices "judo economics" and limits its capacity sufficiently, it is in the incumbent's interest to accommodate entry. The entrant can increase its profits by selling rights (coupons) to its scarce discount output. If the entrant is less efficient, the incumbent will choose to serve coupon holders at the discount price. When this occurs, the entrant sells coupons but no output, and industry production is rationalized.
We address the patent/antitrust conflict in licensing and develop three guiding principles for deciding acceptable terms of license. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Derived reward holds that the patentholder's profits should be earned, if at all, from the social value created by the invention. Minimalism holds that licenses should not be more restrictive than necessary to achieve neutrality. We argue that these principles are economically sound and rationalize some key decisions of the twentieth century such as General Electric and Line Material. Copyright 2006, Oxford University Press.
Does the extent of competitive pressure industries face influence their produc- tivity? We study a natural experiment conducted in the iron ore industry as a result of the collapse in world steel production in the early 1980s. For iron ore producers, whose only market is the steel industry, this collapse was an ex- ogenous shock. The drop in steel production differed dramatically by region: it fell by about a third in the Atlantic Basin but only very little in the Pacific Basin. Given that the cost of transporting iron ore is very high relative to its mine value, Atlantic iron ore producers faced a much greater increase in com- petitive pressure than did Pacific iron ore producers. In response to the crisis, most Atlantic iron ore producers doubled their labor productivity; Pacific iron ore producers experienced few productivity gains. This article originally ap- peared in the American Economic Review. © American Economic Association. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
This chapter discusses the perceptible movement of empirical scholars from a narrow concern with the role of firm size and market concentration toward a broader consideration of the fundamental determinants of technical change in industry. Although tastes, technological opportunity, and appropriability conditions themselves are subject to change over time, particularly in response to radical innovations that alter the technological regime, these conditions are reasonably assumed to determine inter-industry differences in innovative activity over relatively long periods. Although a substantial body of descriptive evidence has begun to accumulate on the way the nature and effects of demand, opportunity, and appropriability differ across industries, the absence of suitable data constrains progress in many areas. It has been observed that much of the empirical understanding of innovation derives not from the estimation of econometric models but from the use of other empirical methods. Many of the most credible empirical regularities have been established not by estimating and testing elaborate optimization models with published data but by the painstaking collection of original data, usually in the form of responses to relatively simple questions.
Merger review is the most active area of U.S. antitrust policy. It is now widely believed that merger policy must move beyond its traditional focus on short-run, price and output effects to account for longer-run effects on technological innovation. The question is, how should merger policy adapt to technological change? Some have argued that the right response is for antitrust authorities to reduce merger enforcement to prevent unintended harm to innovation. Others have suggested that the enforcement agencies analyze a merger's effects on innovation using the same framework they use to analyze a transaction's effects on prices and output levels. We argue that merger authorities should neither treat innovation like price and output under the existing framework nor retreat from enforcement in the name of innovation. We examine how merger policy should change both to accommodate the influence of innovation on traditional, static efficiency concerns and to recognize that innovation can itself be an important dimension of market performance affected by a merger.
This essay is on the effects of the scope of a patent - e.g., how broad its allowed claims - on subsequent inventing in a field. It is argued that this depends on the topography of technical advance in a field, in particular on how inventions are linked to each other and in the extent to which rapid technical advance requires a diversity of actors and minds, as contrasted with being facilitated by express coordination of inventive activity. Technical advance is examined in several different fields, with a focus on how patents influenced the pace and quality of development. The authors conclude that allowing and enforcing broad patent claims tends to hinder technical progress.
We reassess Arrow's (1962) [Economic Welfare and the Allocation of Resources for Invention, in NBER, The Rate and Direction of Innovative Activity (Princeton University Press, Princeton NJ)] results concerning the effect of market structure on the returns from process innovation. Here we consider product innovations that are vertically differentiated from older products, in the sense of Shaked and Sutton (1982) (Relaxing Price Competition through Product Differentiation, Review of Economic Studies 49, 3–13.), Shaked and Sutton (1983) (Natural Oligopolies, Econometrica 51, 1469–1484.). Competition and monopoly in the old product market provide identical returns to innovation when (i) the monopolist is protected from new product entry, and (ii) innovation is non-drastic, in the sense that the monopolist supplies positive quantities of both old and new products. If the monopolist can be threatened with entry, monopoly provides strictly greater incentives. Welfare may be greater under monopoly when innovation is valuable.
Is more intense product market competition and imitation good or bad for growth? This question is addressed in the context
of an endogenous growth model with “step-by-step” innovations, in which technological laggards must first catch up with the
leading-edge technology before battling for technological leadership in the future. In contrast to earlier Schumpeterian models
in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if
they do innovate, here we find: first, that the usual Schumpeterian effect of more intense product market competition (PMC)
is almost always outweighed by the increased incentive for firms to innovate in order to escape competition, so that PMC has
a positive effect on growth; second, that a little imitation is almost always growth-enhancing, as it promotes more frequent neck-and-neck
competition, but too much imitation is unambiguously growth-reducing. The model thus points to complementary roles for competition
(anti-trust) policy and patent policy.
This paper examines the empirical relationship between technological innovations, market share and stock market value. New
developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity.
We find a robust and positive effect of market share on observable headcounts of innovations and patents although increased
product market competition in the industry tends to stimulate innovative activity. Furthermore, the impact of innovation on
market value is larger for firms with higher market shares. We argue that our results are consistent with models where high
market share firms have incentives to pre-emptively innovate.
Many studies have documented large and persistent productivity differences across producers, even within narrowly defined industries. This paper both extends and departs from the past literature, which focused on technological explanations for these differences, by proposing that demand-side features also play a role in creating the observed productivity variation. The specific mechanism investigated here is the effect of spatial substitutability in the product market. When producers are densely clustered in a market, it is easier for consumers to switch between suppliers (making the market in a certain sense more competitive). Relatively inefficient producers find it more difficult to operate profitably as a result. Substitutability increases truncate the productivity distribution from below, resulting in higher minimum and average productivity levels as well as less productivity dispersion. The paper presents a model that makes this process explicit and empirically tests it using data from U.S. ready-mixed concrete plants, taking advantage of geographic variation in substitutability created by the industry's high transport costs. The results support the model's predictions and appear robust. Markets with high demand density for ready-mixed concrete and thus high concrete plant densities have higher lower-bound and average productivity levels and exhibit less productivity dispersion among their producers.
Increases in import competition led to large increases in labor productivity growth in highly concentrated industries during the period from 1975 through 1987. The finding is based on a panel of ninety-four manufacturing industries observed over four periods, each of three years duration. Imports had no observable effects on productivity growth in less concentrated industries; the strong effects in concentrated industries did not occur contemporaneously but appeared with a one-period lag. The effects are weakened but still statistically significant when Bureau of Labor Statistics productivity data are replaced by National Bureau of Economic Research data and in a larger panel with less precise trade data. Copyright 1994 by MIT Press.
A vast and often confusing economics literature relates competition to investment in innovation. Following Joseph Schumpeter, one view is that monopoly and large scale promote investment in research and development by allowing a firm to capture a larger fraction of its benefits and by providing a more stable platform for a firm to invest in R&D. Others argue that competition promotes innovation by increasing the cost to a firm that fails to innovate. This lecture surveys the literature at a level that is appropriate for an advanced undergraduate or graduate class and attempts to identify primary determinants of investment in R&D. Key issues are the extent of competition in product markets and in R&D, the degree of protection from imitators, and the dynamics of R&D competition. Competition in the product market using existing technologies increases the incentive to invest in R&D for inventions that are protected from imitators (e.g., by strong patent rights). Competition in R&D can speed the arrival of innovations. Without exclusive rights to an innovation, competition in the product market can reduce incentives to invest in R&D by reducing each innovator's payoff. There are many complications. Under some circumstances, a firm with market power has an incentive and ability to preempt rivals, and the dynamics of innovation competition can make it unprofitable for others to catch up to a firm that is ahead in an innovation race.
Many researchers and commentators underestimate the length and importance of the time lags between initial research investment and ultimate impacts on the development and adoption of technological innovations. In both econometric studies of productivity and ex post and ex ante benefit-cost evaluations of research investments, researchers typically impose untested assumptions about the R&D lag, which can have profound implications for the results. In this paper we present a range of evidence on agricultural R&D lags including both aggregative analysis of U.S. agricultural productivity using time series data, and some specific details on the timelines for the research, development, and adoption processes for particular mechanical and biological innovations in U.S. agriculture. The aggregative analysis makes use of a comparatively rich state-level data set on U.S. agriculture that makes it possible to test hypotheses about the R&D lag and to evaluate the implications for the specification of models of production and for findings regarding the rate of return to public research investments. The results support the use of a longer lag with a different shape than is typically imposed in studies of industrial R&D. These findings are supported by the timelines for specific technological innovations, including new crop varieties, as well as tractors and other mechanical innovations.
The UK and US tobacco industries provide a particularly clean place to examine the impact of changes in market structure on firm conduct and productivity in a rapidly innovating industry. Although each industry had roughly equal access to new manufacturing technologies, the industries were monopolized at different times. The US lost an early productivity lead after the formation of the Tobacco Trust in 1890, but regained it after the UK industry merged to monopoly in 1902 and the Trust was broken up in 1911. Supplementary evidence suggests that technological innovation and consolidation of production were more rapid during competitive periods. Copyright Blackwell Publishing Ltd 2003.
This paper examines excess-capacity barriers to entry and investment dynamics in a sample of thirty-eight chemical product industries. Logit and log-linear models of investment behavior are estimated, and specific case examples are considered. The results show that incumbents rarely built excess capacity ereemptively in an effort to deter entry. In general, entrants and incumbents exhibited similar investment behavior. Copyright 1987 by Blackwell Publishing Ltd.
En France, une ann�e suppl�mentaire au-del� du taux plein dans le r�gime g�n�ral ne donne droit � aucune augmentation de pension. Cette taxe sur le prolongement d'activit� distort les choix des agents en faveur d'un �ge de d�part en retraite inf�rieur � celui qui pr�vaudrait dans un contexte optimal. Cette taxe pourrait �tre �limin�e par la mise en place d'un syst�me qui lierait le taux de remplacement � l'�ge de d�part en retraite de fa�on � respecter la neutralit� actuarielle. Pour des raisons exactement oppos�es � la situation pr�valant actuellement, ce syst�me ne permet pas d'assurer des moyens de financement suppl�mentaires pour les caisses des r�gimes par r�partition. Il existe en effet un dilemme entre une taxe �lev�e et un allongement significatif de la dur�e d'activit�. Nous pr�sentons un mod�le tr�s simplifi� � deux p�riodes qui permet de d�terminer de fa�on explicite et transparente la taxe sur la prolongation d'activit� qui correspond au sommet de la courbe de Laffer. Dans un second temps, nous pr�sentons, sur la base d'une maquette beaucoup plus d�taill�e de l'�conomie fran�aise, des r�sultats quantitatifs qui illustrent de fa�on concr�te notre analyse th�orique.
R&D spillovers are, potentially, a major source of endogenous growth in various recent "new growth theory" models. This paper reviews the basic model of R&D spillovers and then focuses on the empirical evidence for their existence and magnitude. It surveys the older empirical literature with special attention to the economic difficulties of actually coming up with convincing evidence on this topic. Taken individually, many of the studies are flawed and subject to a variety of reservations, but the overall impression remains that R&D spillovers are both prevalent and important. Copyright 1992 by The editors of the Scandinavian Journal of Economics.