Posted by Social Science Research Network
Exclusionary Conduct of Dominant Firms, R&D Competition, and Innovation – Jonathan B. Baker (American University – Washington College of Law)
ABSTRACT: This paper evaluates the innovation consequences of antitrust enforcement against the exclusionary conduct of dominant firms through a Nash equilibrium model of research and development (R&D) competition to create new products. In the two-firm model, whether one firm regards the other firm’s R&D investment as a strategic complement or strategic substitute turns on an increasing differences condition: whether the first firm’s incremental benefit of increased R&D investment is greater if its rival’s R&D effort succeeds or if its rival’s R&D effort fails. Antitrust prohibitions on pre-innovation exclusion and post-innovation exclusion are found to be effective in different strategic settings: preventing dominant firm exclusion of its rival from post-innovation (pre-innovation) product market competition increases the overall likelihood of industry innovation if the dominant firm’s best response function slopes upward (downward) and is sufficiently steep, or if its rival’s best response function slopes downward (upward) and is sufficiently steep. An antitrust prohibition on dominant firm exclusion of its rival from R&D competition increases the overall likelihood of industry innovation if the dominant firm regards rival R&D investment as a strategic complement.
Featured News
Google and South Carolina Clash Over State Records Demand
May 8, 2024 by
CPI
Telefonica Germany Teams Up with Amazon Web Services to Migrate 5G Customers
May 8, 2024 by
CPI
Federal Judge Grants $7.4 Million Settlement in Pork Price-Fixing Case
May 8, 2024 by
CPI
Wilson Sonsini Bolsters Antitrust and Competition Practice with Key Partner Returns
May 8, 2024 by
CPI
EU to Scrutinize Telecom Italia’s Network Sale to KKR
May 8, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI