This article 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’s R&D investment as a strategic complement or 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 fails. Antitrust prohibitions on pre-innovation product market exclusion, post-innovation product market exclusion, and exclusion from R&D competition, are found to be effective in different strategic settings.
Review of Industrial Organization – Springer Journals
Published: Sep 11, 2015
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