Monday, May 26, 2008
Posted by D. Daniel Sokol
Favoring Dynamic over Static Competition: Implications for Antitrust Analysis and Policy is the newest working paper by David Teeece (Berkeley Haas School of Business).
ABSTRACT: This paper asks how competition policy should be shaped if it were to favor Schumpeterian (dynamic) competition over neoclassical (static) competition. Schumpeterian competition is the kind of competition that is engendered by product and process innovation. Such competition not only brings price competition—it tends to overturn the existing order. A framework that favors dynamic over static competition would put less weight on market share and concentration in the assessment of market power, and more weight on assessing potential competition and enterprise level capabilities. By embedding recent developments in evolutionary economics and the behavioral theory of the firm into antitrust analysis, a more robust framework for antitrust economics can be developed. Such a framework is likely to soften remaining tensions between antitrust and intellectual property. It is also likely to lead to less confidence in the standards tools of antitrust economics when the business environment is associated with rapid technological change.