Antitrust in Innovative Industries

Ilya Segal and Michael Whinston

American Economic Review, 2007, vol. 97, issue 5, 1703-1730

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. (JEL K21, L13, L14, L40, O30)

JEL-codes: K21 L13 L14 L40 O30 (search for similar items in EconPapers)
Date: 2007
Note: DOI: 10.1257/aer.97.5.1703
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Citations: View citations in EconPapers (88)

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Working Paper: Antitrust in Innovative Industries (2005)
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