Favoring Dynamic over Static Competition

Abstract

This chapter asks how competition policy should be shaped if it were to favor Schumpeterian 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, and more weight on assessing potential competition and enterprise-level capabilities. Developments in evolutionary economics and the behavioral theory of the firm in recent decades indicate how the machinery of a new framework can be engineered and applied to antitrust. Introduction In 1988, in anticipation of the centennial of the Sherman Act, my Berkeley colleagues and I held a conference on campus that led to the 1992 volume titled Antitrust, Innovation, and Competitiveness , with contributions from many of the leading scholars in antitrust law and economics. The conference was designed to alert the law and economics communities to a set of emerging issues on antitrust and innovation. With hindsight, we believe it was a watershed event, and a slow and reluctant awakening to antitrust and innovation issues is now underway.