Competition Policy in Network Industries: An Introduction

Article Source: NET Institute Working Paper No. 04-24, 2004; NYU, Center for Law and Business Research Paper No. 03-10
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This paper looks at how public policy should evolve to regulate network industries.


Policy Relevance:

Network industries are the foundation of the new economy, and if we keep using old antitrust laws to regulate them, we’ll hinder growth.


Key Takeaways:
  • Network industries are different than “normal” industries because the value of their product to users increases if more people use the product.
    • Examples of network industries include: telecommunications, the Internet, television, airlines, credit cards, and ATMs. There can also be “virtual” networks—all VHS video players, or all computers running Windows .

  • Even a perfectly regulated marketplace of network industries may lead to monopolies or dominant firms – and that is not necessarily a bad thing. People benefit from belonging to larger networks.

  • The legal system does not yet have a framework for analyzing competition policy issues in network industries.

  • There needs to be a new benchmark developed, looking at how these firms control technical standards, bundle, price, and use their power in other markets. This needs to happen quickly, because network industries are the foundation of the new economy.



Nicholas Economides

About Nicholas Economides

Nicholas Economides is Professor of Economics at the Stern School of Business of New York University. He is also Executive Director of the NET Institute, a worldwide focal point for research on the economics of network and high technology industries. Professor Economides is an internationally recognized academic authority on network economics, electronic commerce and public policy.

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