Antitrust & Competition Policy Blog

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

Thursday, November 8, 2018

Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets

Kate Ho, Princeton University - Department of Economics; National Bureau of Economic Research (NBER) and Robin S. Lee, Harvard University - Department of Economics; National Bureau of Economic Research (NBER) have an interesting paper on Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets.

ABSTRACT: We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, Nash-in-Nash with Threat of Replacement, that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer-optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer bene fits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.

November 8, 2018 | Permalink | Comments (0)

Competition Law and Trade in Energy vs. Sustainable Development: A Clash of Individualism and Cooperative Partnerships?

Paolo Davide Farah, West Virginia University (WV, USA); gLAWcal - Global Law Initiatives for Sustainable Development (United Kingdom) and Tivadar Ötvös, gLAWcal - Global Law Initiatives for Sustainable Development ask Competition Law and Trade in Energy vs. Sustainable Development: A Clash of Individualism and Cooperative Partnerships?

ABSTRACT: At first sight the potential discrepancy between competitive behavior of market participants, trade rules and the basic notion of sustainable development may seem to be of a negligible importance. However, during the interactions of market processes with sustainability goals through various levels of support, provided by public or private entities problems arise, even more so in the light of the commitments of the Paris Agreement, the United Nations Sustainable Development Goals (SDGs) and corporate social responsibility principles. This Article aims to address the most obvious overlappings between these areas under the coverage of legal provisions regulating the grant of state aid, subsidies and policies related to mutual cooperation of private subjects towards achieving sustainability. The purpose is to draw conclusions regarding the criteria taken into consideration during the evaluation of competition distorting behaviors in case of environmental and sustainable energy state aid, subsidy- and contract-based cooperation and coalitions among private entities.

November 8, 2018 | Permalink | Comments (0)

Wednesday, November 7, 2018

Assistant Attorney General Makan Delrahim Delivers Remarks at the Federal Institute of Telecommunications’ Conference in Mexico City

See here.

November 7, 2018 | Permalink | Comments (0)

Upstream Bundling and Leverage of Market Power

Alexandre de Corniere, Toulouse School of Economics and Greg Taylor, University of Oxford - Oxford Internet Institute write on Upstream Bundling and Leverage of Market Power.

ABSTRACT: Motivated by the recent Google-Android antitrust case, we present a novel rationale for bundling by a multiproduct upstream firm. Consider a market where downstream firms procure components from upstream suppliers. U1 is the only supplier of component A, but faces competition for component B. Suppose that component A increases demand for the downstream product and that contractual frictions induce positive wholesale markups. By bundling A and B, U1 reduces its B-rivals' willingness to offer slotting fees to the downstream firm, thereby allowing U1 to capture more of the industry profit. Bundling harms the downstream firm and the B rivals, and can be anticompetitive.

November 7, 2018 | Permalink | Comments (0)

Vertical Arrangements and Upstream Mergers

Emmanuel Petrakis, University of Crete - Department of Economics and Panagiotis Skartados, University of Crete - Department of Economics address Vertical Arrangements and Upstream Mergers.

ABSTRACT: We study the incentives for horizontal upstream mergers in a quantity-setting vertically related industry, under bargain and endogenous contract types. We show that the contract types used could have important consequences for the equilibrium market structure and vice versa. If it is the retailers who choose contract types, they share the same preferences as the policymakers and choose to offer two-part tariff contracts, leading the suppliers not to merge. This result has some obvious policy implications. If it is the suppliers who decide contract types, they prefer to merge and offer a partial forward vertical ownership scheme. Under Bertrand competition, there is always an upstream merger, but the common manufacturer will offer a two-part tariff contract for intermediate bargain power levels. For high bargain power levels, he will choose a partial forward vertical ownership scheme, while for low bargain power will suffer from negative profits. A policymaker, considering the maximization of the social welfare should consider the upstream merger and two-part tariff contracts.

November 7, 2018 | Permalink | Comments (0)

Deutsche Lufthansa v Commission: All (Good) Remedies Must Come to an End

Robert Benditz writes on Deutsche Lufthansa v Commission: All (Good) Remedies Must Come to an End.

ABSTRACT: The General Court for the first time rules under what circumstances the Commission has a duty to waive merger remedies. To prevent market distortions, the Commission must waive remedies that are no longer necessary to ensure effective competition. In response to a waiver request, the Commission must pro-actively seek to corroborate or refute evidence using its investigative tools.

November 7, 2018 | Permalink | Comments (0)

Recoupment, Market Power, and Predatory Pricing

Louis Kaplow, Harvard Law School; National Bureau of Economic Research (NBER) explores Recoupment, Market Power, and Predatory Pricing. Worth downloading!

ABSTRACT: Recoupment inquiries play an important role in predatory pricing cases. Nevertheless, their place in antitrust analysis is unclear and potentially problematic in ways that are not fully appreciated. Does a recoupment requirement define, augment, or replace the preexisting monopoly power requirement that involves similar analysis? How can a recoupment test be inserted in sequential assessments of alleged predatory pricing when all of the steps are intertwined with the others, including those deemed to come later? Why is a plaintiff permitted to show either that recoupment was ex ante plausible or that sufficient ex post profit recovery occurred, rather than requiring one in particular, or both? This article addresses these questions by examining the underlying purposes of recoupment assessments and predatory pricing inquiries more broadly. As will become evident, much of the analysis is relevant not just to predatory pricing but to other forms of anticompetitive conduct as well.

November 7, 2018 | Permalink | Comments (0)

Tuesday, November 6, 2018

Principal Deputy Assistant Attorney General Andrew C. Finch Delivers Remarks at Judge Douglas H. Ginsburg Liber Amicorum Conference at Antonin Scalia Law School

See here.  Doug is the keeper of the Chicago tradition and one of the nicest people in the field.  Everyone should appreciate his contributions.

November 6, 2018 | Permalink | Comments (0)

Serial Collusion by Multi-Product Firms

William E. Kovacic, George Washington University - Law School; King's College London – The Dickson Poon School of Law, Robert C. Marshall, Pennsylvania State University, College of the Liberal Arts - Department of Economic, and Michael J. Meurer, Boston University - School of Law offer evidence about Serial Collusion by Multi-Product Firms.

ABSTRACT: We provide empirical evidence that many multi-product firms have each participated in several cartels over the past 50 years. Standard analysis of cartel conduct, as well as enforcement policy, is rooted in the presumption that each cartel in which a given firm participates is a singular activity, independent of other cartel conduct by the firm. We argue that this analysis is deficient in many respects in the face of serial collusion by multi-product firms. We offer policy recommendations to reign in serial collusion, including a mandatory coordinated effects review for any merger involving a serial colluder, regardless of the apparent nature of the merger.

November 6, 2018 | Permalink | Comments (0)

Bundling Incentives in (Many-to-Many) Matching with Contracts

Jonathan Ma, Harvard University and Scott Duke Kominers, Harvard University discuss Bundling Incentives in (Many-to-Many) Matching with Contracts.

ABSTRACT: In many-to-many matching with contracts, the way in which contracts are specified can affect the set of stable equilibrium outcomes. Consequently, agents may be incentivized to modify the set of contracts upfront. We consider one simple way in which agents may do so: unilateral bundling, in which a single agent links multiple contracts with the same counterparty together. We show that essentially no stable matching mechanism eliminates incentives for unilateral bundling. Moreover, we find that unilateral bundling can sometimes lead to Pareto improvement―and other times produces market power that makes one agent better off at the expense of others.

November 6, 2018 | Permalink | Comments (0)

Competition Authority in a Trap? A Few (Bitter) Words on Making Public Policy by Counteracting an Unfair Use of a Contractual Advantage in Agri-Food Sector in Poland

Agata Jurkowska Gomulka, University of Information Technology and Management, Faculty of Administration and Social Sciences, Chair of Administrative Law asks Competition Authority in a Trap? A Few (Bitter) Words on Making Public Policy by Counteracting an Unfair Use of a Contractual Advantage in Agri-Food Sector in Poland.

ABSTRACT: A problem of counteracting bargaining powers of retailers, specially in agri-food sector, has been recently addressed by regulations in a few European countries but so far it has not been subject to academic considerations. A paper aims at finding rationales of granting administrative bodies with competences of interfering in contractual relationships between market players in reference to an abuse or misuse of bargaining power and to assess a possibility and probability of balancing public and private interests by administrative bodies applying regulations on counteracting an unfair use of a bargaining power. A point of reference for considerations is a Polish regulation dated from December 2016 - Act on Counteracting the Unfair Use of Contractual Advantage in the Trade in Agricultural and Food Products. In a lack of relevant case law a paper is based on a descriptive method of research as well as a method of conceptual analysis. A paper contests a correctness and rationality of selecting a competition authority as an enforcer of a discussed regulation. A competition authority seems to be caught in a trap of opposite (public and private) interests - an antitrust authority shall undertake an intervention in an interest of a private entity which in many situations may be seen as an intervention against public interest. A paper contributes to an ongoing discussion on EU's proposals for actions on eliminating imbalances between big retailing networks and food suppliers.

November 6, 2018 | Permalink | Comments (0)

CPI Interviews Hal Varian

The inaugural conference "Challenges to Antitrust in a Changing Economy", co-organized by CPI & CCIA, at Harvard Law School is next Friday, November 9th. CPI’s Editor in Chief Sam Sadden has interviewed UC Berkeley Emeritus Professor and Google's Chief Economist, Hal Varian.


In this audio interview,  Professor Varian explains his point of view on topics such as monopoly, market definition, and platform technologies. These issues will be further analyzed during the panel discussion on "Is monopoly power rising?". The panel will be moderated by professor and economist David Evans (Global Economics Group). Other speakers include professors Jim Bessen (Boston University School of Law), Esteban Rossi-Hansberg(Department of Economics and Woodrow Wilson School, Princetown University) and Marc Rysman (Department of Economics, Boston University). 


This conference is co-organized by CPI and CCIA.

See the full program of the conference and register free here



Listen to the full interview here



Interview Transcript

External speaker: Competition Policy International presents CPI Talks with Professor Hal Varian.


Sadden: CPI is really pleased to have the opportunity to speak with UC Berkeley Professor Emeritus of Business, Economics, and Information Management and Chief Economist at Google, Hal Varian. We look forward to the CPI and CCIA Conference at Harvard Law School on November 9th entitled "Challenges to Antitrust in a Changing Economy." Professor Varian, thanks for taking the time to sit down and talk with CPI today, so let's jump right in. The panel that you will be a part of asked the question "In Monopoly Power Rising?" So, how do you define monopoly or is it defined generally, and how should it be defined today? 

Varian: Well, I went back and looked at my undergraduate textbook to see how I defined monopoly when I did that, and I said it was a situation where a market is dominated by a single seller of a product. Now, the issue about that is everything hinges on what you consider a market. Coca-Cola is the only firm that can sell Coca-Cola, but there's lots of firms that can sell cola drinks, and there's lots of firms that can sell beverages, in general, so this market definition is the key issue particularly when there are new products on the market and the market is evolving in ways that are not necessarily anticipated by the protagonist.


Sadden: When a possible monopolist moves into new lines of business, what are some ways it improves product quality, and what are some clear examples of the contrary, i.e., a reduction in product quality?

Varian: Well, when a company’s moving into a new market, they have to think that they have some competitive edge. Maybe they can produce existing products more inexpensively or maybe they can produce products that are of higher quality. In general, if they move into a market and quality goes down, they’ve made a mistake, right? You only go to those places where you think you have a chance of beating the incumbent, and that would require the expectation that you would be able to compete effectively with the existing players.


Sadden: Yeah, that makes sense. How should we think about the application of antitrust to platform technologies, and should we expect to see ... I know you don't have a crystal ball, but should we expect to see greater convergence on both sides of the Atlantic in the near future or more of a sense of divergence on approaches to regulation and enforcement?

Varian: The term platform seems to mean different things to different people. The original definition of platform was it was something where you could build on top of, so an operating system would be the clearest example. If you think of Windows or you think of Android, that would be a platform because lots of other people could create applications on top of that particular platform.

Nowadays, the meaning of the term seems to have broadened to refer to almost any kind of online business, but particularly those businesses where there's some two-sided matching going on. People are seeking information. People are providing information. People are seeking news, and people are providing news. People are seeking products, and someone’s providing products, and so on. That’s what I would normally call a two-sided market or a K-sided market more generally. When you’re talking to somebody about platforms, the first thing you have to do is agree on what terms you’re going to use.

Oh, and I didn’t answer the final question do I think the gap is narrowing in the understanding of platforms? I don't see any signs of that. In fact, I see more confusion because of this proliferation of these different definitions of what a platform is. Right now, it seems there’s a lot of different views on that particular question.


Sadden: It may be useful to come to, at some point, as much of a general consensus internationally on the definitions of platforms and the markets, two-sided markets, what those are and what they are not, something along those lines.

Varian: Absolutely. Same thing with network effects, and economies of scale, and so on. People seem to have different ideas of these concepts, so when you start a conversation, agree on your terms to begin with.


Sadden: Right. Lastly, discussions on suppression of innovation are in the air and gaining traction. Where do you think things stand today, and what’s likely to, or may, happen moving forward?

Varian: Well, let me give you my personal view on this. I think you can’t put the “technology genie” back in the bottle. There are a lot of services, capabilities, and so on which were once quite difficult and now become very easy to do. My favorite example is facial recognition. There’s lots of talk about regulation facial recognition, but anybody with a little bit of expertise and access to some computing power can create their own facial recognition system now without a great deal of difficulty, so it’s going to be very, very hard to regulate something that could be created in anybody’s bedroom.


Sadden: Well, thank you very much, Professor Varian. I really appreciate you sitting down to take time and answer some of these questions. We look forward to seeing you at Harvard Law School on November 9th at the conference “Challenges to Antitrust in a Changing Economy.” We hope to see many of our listeners there as well. Thank you once again. I really appreciate it.

November 6, 2018 | Permalink | Comments (0)

Citation Weighting, Patent Ranking, and Apportionment of Value for Standard-Essential Patents

J. Gregory Sidak & Jeremy O. Skog describe Citation Weighting, Patent Ranking, and Apportionment of Value for Standard-Essential Patents.

ABSTRACT: A critical question repeatedly arises in litigation over the infringement of standard-essential patents (SEPs): What is an intellectually rigorous methodology for apportioning, across the various patents practiced in a multicomponent product, the value that the patents contribute to each enabling technology that gives the multicomponent product value? To address this question, it is necessary to derive an appropriate measure of the patents’ value, relative to the value of other patents that are also essential to the standard. There exist many competing methodologies that purport to do so. We examine various patent-weighting methodologies that rely on forward patent citations to assign a patent’s value. We show that one’s choice of a given methodology is of secondary importance to the anterior question of whether to implement any patent-valuation methodology at all during the apportionment inquiry.

November 6, 2018 | Permalink | Comments (0)

Monday, November 5, 2018

Mergers and Marginal Costs: New Evidence on Hospital Buyer Power

Stuart Craig, Matthew R. Grennan, and Ashley Swanson study Mergers and Marginal Costs: New Evidence on Hospital Buyer Power.

ABSTRACT: We estimate the effects of horizontal mergers on marginal cost efficiencies – an ubiquitous merger justification – using data containing supply purchase orders from a large sample of US hospitals 2009-2015. The data provide a level of detail that has been difficult to observe previously, and a variety of product categories that allows us to examine economic mechanisms underlying “buyer power.” We find that merger target hospitals save on average $176 thousand (or 1.5 percent) annually, driven by geographically local efficiencies in price negotiations for high-tech “physician preference items.” We find only mixed evidence on savings by acquirers.

November 5, 2018 | Permalink | Comments (0)

Antitrust Law and Patent Settlement Design

Erik Hovenkamp discusses Antitrust Law and Patent Settlement Design.

ABSTRACT: For competing firms, a patent settlement provides a rare opportunity to write an agreement that forestalls competition without transparently violating the antitrust laws. Problematically, such agreements are highly profitable for reasons that have nothing to do with resolving a patent dispute. Thus, even if the firms think the patent is very likely invalid or noninfringed, they prefer to restrain competition to monopoly and share in the proceeds. In response, antitrust has recently come to focus on how the settlement’s competitive effects compare to the expected result of foregone patent litigation, which seemingly requires some assessment of the likelihood that the patentee would have prevailed. But this “case-within-a-case” approach leads to major complications in practice. Indeed, outside of one well-known settlement format—so-called “pay-for-delay” agreements—how to administer this burgeoning antitrust standard remains an open question. 

Applying recent work in economics, this article argues that antitrust law should reframe its settlement analysis to focus entirely on the nature of the settlement agreement—the particular way it restrains competition or otherwise redistributes profits between the firms. That is because the settlement’s design is ultimately what determines how private bargaining outcomes will compare to the firms’ litigation expectations. Under this approach, the antitrust question can be addressed without inquiring into the likelihood that any particular patent is valid and infringed, making it much more administrable. Instead, the focus is on how the settlement design affects private bargaining generally. This disentangles the relevant antitrust violation from the extent of the resulting harm, and can be applied to all kinds of settlement agreements. Finally, this approach is broadly consistent with the Supreme Court’s recent Actavis decision. All of this points to a clear prescription for antitrust reform: evaluate the agreement, not the patent.

November 5, 2018 | Permalink | Comments (0)

The Logic of Market Definition

David Glasner, Federal Trade Commission and Sean Patrick Sullivan, University of Iowa - College of Law study The Logic of Market Definition. Worth downloading!

ABSTRACT: Despite the voluminous commentary that the topic has attracted in recent years, much confusion still surrounds the proper definition of antitrust markets. This paper seeks to clarify market definition, partly by explaining what should not factor into the exercise. Specifically, we identify and describe three common errors in how courts and advocates approach market definition. The first error is what we call the natural market fallacy: the mistake of treating market boundaries as preexisting features of competition, rather than the purely conceptual abstractions of a particular analytical process. The second is the independent market fallacy: the failure to recognize that antitrust markets must always be defined to reflect a theory of harm, and do not exist independent of a theory of harm. The third is the single market fallacy: the tendency of courts and advocates to seek some single, best relevant market, when in reality there will typically be many relevant markets, all of which could be appropriately drawn to aid in competitive effects analysis. In the process of dispelling these common fallacies, this paper offers a clarifying framework for understanding the fundamental logic of market definition.

November 5, 2018 | Permalink | Comments (0)

Content and Access Provision in a Discrete Competition Model

Bronwyn E. Howell, Victoria University of Wellington - School of Management and Petrus H Potgieter, University of South Africa explore Content and Access Provision in a Discrete Competition Model.

ABSTRACT: The burgeoning digital economy is characterized by providers offering their products and services to consumers in bundles. This is hardly surprising, given that the non-rival, non-excludable and infinitely expansible characteristics of digital goods with marginal cost of zero strongly favor use of bundling strategies. Consequently, firms, policy-makers, competition authorities and courts are challenged to consider the actual and possible effects of bundling on profits, consumer and total welfare, sometimes in advance of products being brought to market. Current literature provides some guidance for evaluating possible outcomes. However, theoretical tractability requires most models to make highly stylized assumptions rarely observed or anticipated in the real-life situations motivating inquiry. Different ways of evaluating these complex cases are required. Numerical analysis of the output of simulation models endeavoring to capture the specific characteristics of the real-life cases offers an alternative means of evaluation. Using this approach, we consider a competition model in which: * the firms, consumers and differentiated products are finite in number; * prices are discrete and not continuous; * consumers may purchase multiple items in a single product category where the degree of complementarity or substitutability of the product categories can also vary across consumers; and * where consumer-specific cost savings are obtained when purchasing multiple items from the same firm. Approximate solutions are obtained through numerical simulation. The model corresponds to real-life business situations where firms have limited opportunities to sample information about a market where (for example) firms offer differentiated Internet access (e.g. cable and copper/fiber) and content offers (e.g. Netflix, Spotify, other proprietary video (television) content products, gaming, home security monitoring) both stand-alone and in bundles. In our model, the firms act in concert to maximize the total firm revenue. Our main finding is that the interplay between maximal firm revenue, consumer surplus and prices is very complex and that high firm revenue and high consumer surplus are not antithetic. It suggests also that consumer surplus and market concentration are not necessarily related and that many market outcomes that are observed may be due to chance rather than design as diverse outcomes can accompany situations that are, to the firms, difficult to distinguish.

November 5, 2018 | Permalink | Comments (0)

Friday, November 2, 2018

Due Process in Competition Law Enforcement: A Comparative Perspective November 21, 2018

Mannheim Center for Competition and Innovation, and the Center for Technology, Innovation and Competition of the University of Pennsylvania Law School

Due Process in Competition Law Enforcement: A Comparative Perspective
Hotel Sofitel, Luxembourg
4, rue du Fort Niedergrünewald - L-2226 Luxembourg
November 21, 2018

Recent European judicial decisions and changes in the restructuring of the administrative apparatus in China and other countries have provided an opportune moment to reconsider the proper role of due process principles in competition law enforcement.  This conference will release a new international study comparing transparency and fairness in competition law enforcement in Europe, China, and the U.S.  It will also feature a keynote address by European Court of Justice Advocate Generale and former Giovanni Pitruzzella and panels of distinguished current and former jurists and competition policymakers to explore key issues such as the disclosure of evidence to the parties, separation of investigatory and adjudicative personnel, and judicial review.

Please register here.
9:00-9:15         Welcome
Thomas Fetzer, University of Mannheim
Christopher Yoo, University of Pennsylvania
9:15-9:45         Keynote address - Giovanni Pitruzzella, European Court of Justice
9:45-10:30       Presentation of the multijurisdictional study
10:30-11:00      Break
11:00-12:00      Panel 1 – Disclosure of evidence to parties
Ian Forrester, General Court of the EU
Douglas Ginsburg, U.S. Court of Appeals for the D.C. Circuit, and former Assistant Attorney General of the Antitrust Division, U.S. Department of Justice
Kris Dekeyser, DG Competition
12:00-13:15      Lunch
13:15-14:30      Panel 2 – Separation of investigatory/prosecutory and adjudicative personnel
Marc van der Woude, General Court of the EU
John Temple Lang, University of Dublin - Trinity College
Sir Philip Lowe, Oxera and former Director-General for Competition, European Commission (tentatively)
14:30-15:00      Break
15:00-16:15      Panel 3 – Judicial review
Ulf Öberg, General Court of the EU
Sir Nicholas Forwood QC, White & Case, and former General Court Judge
Douglas Ginsburg, U.S. Court of Appeals for the D.C. Circuit and former Assistant Attorney General of the Antitrust Division, U.S. Department of Justice
16:15-16:30      Closing
All times are local (GMT +1). Lunch will be served.

November 2, 2018 | Permalink | Comments (0)

Antitrust and the Trump Administration: The First Two Years by Professor William Kovacic, King's College London Thursday 15 November 2018

Centre of European Law
The Dickson Poon School of Law
Public Lecture

Antitrust and the Trump Administration: The First Two Years

by Professor William Kovacic, King's College London

Thursday 15 November 2018
18.00 -19.00
Edmond Safra Lecture Theatre
King's College London
Strand, London

Federal antitrust enforcement since 2016 has surprised observers who expected the Department of Justice and the Federal Trade Commission to rest on their oars during the Trump Administration.  Notable developments have included challenges to high profile mergers (including AT&T's proposed acquisition of Time Warner) and promises of intensified scrutiny of leading firms in the information services sector.  This presentation will take stock of the Trump Administration programme to date and consider its significance for competition policy in the United States and in the global arena.

William E. Kovacic is the Global Competition Professor of Law and Policy at the George Washington University Law School and Director of its Competition Law Center. He is currently a Visiting Professor at The Dickson Poon School of Law at King’s College London. Since August 2013, he has served as a non-executive director on the board of the United Kingdom’s Competition and Markets Authority. With Ariel Ezrachi, he edits the Journal of Antitrust Enforcement. From January 2006 to October 2011, he was a member of the Federal Trade Commission and chaired the agency from March 2008 until March 2009. He was the FTC’s General Counsel from 2001 through 2004.

To reserve a place for this lecture click here

November 2, 2018 | Permalink | Comments (0)

Competition at the Dawn of Artificial Intelligence

Robin Feldman, University of California Hastings College of the Law and Nick Thieme, University of California Hastings College of the Law explore Competition at the Dawn of Artificial Intelligence.

ABSTRACT: AI is in a state of perpetual and increasing revolution, with the scale of each change fully eclipsing the last. Although truly sentient machines are science fiction, experts believe society is on the verge of a technological tipping point, making future advancements unrecognizable by today’s standards. This transition may shortly resemble the shift from analog to digital technology — or from personal computing to the Internet — in which, both actively and passively, consciously and unconsciously, willingly and unwillingly, no aspect of our daily lives remains untouched. As we navigate this extraordinary gateway, what types of intellectual property policies will foster the innovation that secures our place at the head of the revolution? At the heart of this issue lies the question of how to manage forms of invention in which a computer participates, or even dominates, the inventive process. The question can be thought of as a matching problem, trying to connect the entity that invented a product, on one side, with the proper allocation of inventor rights on the other. Within the theoretical framework of the patent system, the aim of this matching problem is to incentivize innovation. Specifically, if the group of potential inventors includes both humans and computers, any invention must be either 1) created by humans alone, 2) invented in tandem by humans and computers, 3) invented by computers alone, or 4) “invented” by no neither. The paper examines each aspect of the matching equation, recommending a pathway for optimizing innovation and competition.

November 2, 2018 | Permalink | Comments (0)