Competition Policy for High Technology Industries

Author: Martin* S.

Source: Journal of Industry, Competition and Trade, Volume 1, Number 4, December 2001 , pp. 441-465(25)

Publisher: Springer

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Abstract:

I present a model of optimal product-market competition policy when industries differ in the potential for quality-improving technological advance. In a two-period, model, a competition authority with limited resources administers a deterrence-based competition policy toward two industries. In one of the industries, an incumbent firm chooses the level of resources to invest in a quality-improving R&D project. In the other industry, product quality is constant. Optimal policy requires the competition authority to administer a tougher competition policy before innovation, all else equal, the greater the potential quality improvement. I derive basic results for the case of one-time innovation, and extend them to the cases of sequential innovation and patent protection that confers limited antitrust immunity.

Keywords: competition policy; antitrust policy; innovation

Language: English

Document Type: Research article

Affiliations: 1: FEE/F&O, Roetersstraat 11, University of Amsterdam, NL—1018 WB Amsterdam, The Netherlands s.martin@mgmt.purdue.edu

Publication date: 2001-12-01