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Academic Articles Awards > Mergers

Towards dynamic efficiency: innovation and its implications for antitrust

Melissa A. Schilling, Antitrust Bulletin. 60.3, p. 191, Fall 2015

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Readers’ vote will close on February 15, 2016. Readers’ vote will allow you to nominate 1 article for each of the Awards, i.e., 10 Academic articles, 10 Business articles, and the best Soft Laws. The readers’ short-list of Academic and Business Articles will be communicated to the Board together with the 20 articles nominated by the Steering Committees. The Board will decide on the award-winning articles. Results will be announced at the Awards ceremony to take place in Washington DC on the eve of the ABA Antitrust Spring Meeting on April 5, 2016.

There is growing consensus that the goal of antitrust enforcement should be to manage for dynamic efficiency, that is, an appropriate balance between short-run static efficiencies such as reducing costs and maximizing consumer surplus, and the longer-term gains that arise from innovation. However, determining how to incorporate innovation into efficiency goals is complicated; innovation typically entails great uncertainty, long time horizons, and interdependencies across projects. This means there are no easy solutions for estimating the welfare impact of any given innovation investment or strategy. We can, however, use what we know about how firms manage the innovation process, including how they choose and value projects and ration their capital to meet their short- and long-term needs, to gain insight into how we can best foster firms’ incentives to innovate in ways that improve long-run economic welfare. I provide some illustrative examples for how these insights can be incorporated into antitrust enforcement.

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