Unlocking Technology: Antitrust and Innovation

Innovation and Economic Growth and Competition Policy and Antitrust

Article Snapshot


Daniel Spulber


Journal of Competition Law and Economics, Vol. 4, Issue 4, pp. 915-966, 2008


This paper asks whether technology markets need special regulatory treatment.

Policy Relevance

"Lock in" is very rate. Governments have a poor record picking good technologies. More regulation will do more harm than good.

Main Points

  • “Network effects” exist when something becomes more valuable to a consumer when there are more other users. One fax machine is not useful as no one can send to or receive from it, but as more are added it is more useful.
    • (“Indirect” network effects are different, but are also not problematic).


  • Some, but not all, technologies have network effects. Some argue that government should regulate technology, so that consumers do not get stuck with bad choices, “lock-in” or “path dependence.”
    • In theory, consumers might buy a technology simply because it has the most users, but it is in fact a poor choice for many users down the road.
    • Problems arise in theory when consumers differ, so that that one winner suits group A, but only the other winner suits group B, and vice versa.


  • These problems are not likely to arise. Consumers can choose the “right” technology by sharing information informally, or relying on large-scale mechanisms such as families, mass media, the Internet, and advertising.


  • Technologies with network effects are information and communications, and some electronics goods. Providers have reasons to capture network effects by interconnecting and setting standards to interoperating, and do so.


  • Social networks, transport networks, or transaction networks need not have “network externalities.” Individuals and firms can achieve coordination to capture mutual benefits.

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