Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, November 13, 2007

Antitrust and Positional Arms Races

Posted by D. Daniel Sokol

Michael Sabin a grad student at the Harvard University - John M. Olin Center for Law, Economics, and Business has written recently on Antitrust and Positional Arms Races.

ABSTRACT: The idea of ?winner take all? markets, or harmful ?positional races? as the phenomenon is sometimes called, directly clashes with the philosophy of antitrust regulation. Antitrust advocates competition as the means of achieving its ultimate goal of maximizing welfare. ?Positional? competition, however, produces suboptimal results. Should antitrust law apply to ?winner take all? markets, or should this field be left to other governmental regulation?

This paper addresses the relevance of antitrust regulation to winner-take-all markets and proceeds as follows: Part I describes the phenomenon of suboptimal winner-take-all markets, sometimes called ?arms races? because they spur participants to race each other for supremacy. Part I draws the basic lines of relevant antitrust law and considers ?arms control agreements? as a tool for mitigating this kind of market failure. Part II is dedicated to a short, positive analysis of such agreements under Section 1 of the Sherman Act. In Part III, some thoughts on normative and institutional reasons underlying the analysis in Part IV are presented. Finally, Part V outlines the conclusions.

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