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Antitrust in Innovative Industries

Ilya Segal and Michael Whinston

No 11525, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the effects of antitrust policy in industries with continual innovation. A more protective antitrust policy 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 show that in some cases, holding the innovation rate fixed, as suggested by our comparative statics results, the tension does not arise and a more protective policy necessarily raises the rate of innovation.

JEL-codes: L40 O31 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-reg and nep-tid
Note: IO
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Published as Whinston, Michael and Ilya Segal. "Antitrust in Innovative Industries." American Economic Review 97 (December 2007): 1703-30.

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