Competition Policy and the Economic Approach
Show Less

Competition Policy and the Economic Approach

Foundations and Limitations

Edited by Josef Drexl, Wolfgang Kerber and Rupprecht Podszun

This outstanding collection of original essays brings together some of the leading experts in competition economics, policy and law. They examine what lies at the core of the ‘economic approach to competition law’ and deal with its normative and institutional limitations. In recent years the ‘more economic approach’ has led to a modernisation of competition law throughout the world. This book comprehensively examines for the first time, the foundations and limitations of the approach and will be of great interest to scholars of competition policy no matter what discipline.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 9: Competition, Innovation and Maintaining Diversity through Competition Law

Wolfgang Kerber


Wolfgang Kerber* INTRODUCTION 1. Market competition is a very complex phenomenon, which has many dimensions. Modern game-theoretic industrial economics is a powerful analytical tool for studying important aspects of markets and competition. However, it does not deal with all essential dimensions of competition processes in dynamic market economies. In a recent small article with the title ‘Complexity, Diversity, and Antitrust’ Farrell (2006) asks whether antitrust should protect diversity in situations where the complexity is too high to have reliable information about the right solutions. As an example, he uses the decision of collaborating drug companies to stop the development of a promising drug for peanut allergy treatment by one of the firms in favour of an already existing drug of one of the other companies. Would not the higher diversity of pursuing both approaches be one of the benefits of competition and should not ‘antitrust seek to protect such diversity’ (ibid, 166)? Farrell insists on the importance of a variety of experiments and claims that this ‘econodiversity’ is one of the crucial benefits of competition. Since it is hard to pin down and prove, he calls it the ‘dark matter of competition’ (Farrell 2006: 168–169). It was Hayek (1948, 1978) who first clearly emphasized this dimension of competition with his concept of ‘competition as a discovery procedure’. Starting with the assumption that the best solutions are often not yet known, competition is viewed as an evolutionary trial and error process, in which firms try different solutions and learn from...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.