Primer on Competition Policy and the New Economy, A

Competition Policy and Antitrust

Article Snapshot

Author(s)

Robert W. Hahn

Source

AEI-Brookings Joint Center for Regulatory Studies Working Paper 01-03, 2001

Summary

This paper looks at how competition policy should adapt to the new economy.

Policy Relevance

Old-style competition policy relies on theories that will make it harder for consumers to benefit from networks.

Main Points

  • Traditional competition policy assumes consumers are best off if many firms compete at once.

 

  • Networks industries are different than “normal”  industries because the value of their product to users increases if more people use the product.  Here, consumers may benefit from having a dominant firm.

 

  • In a modern economy with innovation and rapid change, dominant firms are always under pressure from rivals.

 

  • The author recommends:
    • Recognizing antitrust moves slower than innovation.
    • Looking closely at each antitrust case.
    • Looking for competition over time (dynamic competition).
    • Erring on the side of caution in regulating.
    • Avoiding giving firms chances to lobby to hurt competitors.
    • Learning more about how markets actually work.

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