Antitrust, legal standards and investment

Giovanni Immordino and Michele Polo

International Review of Law and Economics, 2014, vol. 40, issue C, 36-50

Abstract: We study the interaction of a firm that invests in research and, if successful, undertakes a business practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In this setting deterrence on actions interacts with deterrence on research. When the practice increases expected welfare the enforcer commits not to intervene by choosing a more rigid per-se legality rule to boost investment, moving to a more flexible discriminating rule combined with type-I accuracy for higher probabilities of social harm. Patent and antitrust policies act as substitutes in our setting; additional room for per-se (illegality) rules emerges when fines are bounded. Our results on optimal legal standards extend from the case of (uncertain) investment in research to the case of (deterministic) investment in physical assets.

Keywords: Legal standards; Accuracy; Antitrust; Innovative activity; Enforcement (search for similar items in EconPapers)
JEL-codes: D73 K21 K42 L51 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Working Paper: Antitrust, Legal Standards and Investment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:40:y:2014:i:c:p:36-50

DOI: 10.1016/j.irle.2014.08.003

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