Working Paper: NBER ID: w11525
Authors: Ilya Segal; Michael Whinston
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.
Keywords: Antitrust; Innovation; Market Competition
JEL Codes: L40; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| More protective antitrust policy (L49) | profits of new entrants (M13) |
| More protective antitrust policy (L49) | profits of incumbents (D43) |
| More protective antitrust policy (L49) | rate of innovation (O35) |
| profits of new entrants (M13) | rate of innovation (O35) |
| profits of incumbents (D43) | rate of innovation (O35) |
| Net effect of antitrust policy on innovation (L49) | rate of innovation (O35) |