Monday, December 10, 2007

Monopolies in Network Industries

About four years ago, I wondered whether monopolists in network industries face the same incentives as monopolists elsewhere. George Priest of Yale Law School has just released a useful and short analysis of similar topics:
Rethinking Antitrust Law in an Age of Network Industries

Yale Law School

Yale Law & Economics Research Paper No. 352

Economists have recognized the increasing role of network industries in our modern economy and have substantially advanced the understanding of network economics. This paper discusses how the special economic features of networks and, in particular, practices that networks adopt to enhance network benefits, requires a reconceptualization of modern antitrust analysis. The proposition is demonstrated by the example of several recent antitrust prosecutions of network practices where the economics of networks were largely ignored. The paper also discusses many cases in the antitrust canon that are more adequately analyzed when the network character of the practice is taken into account. The paper propose a reorganization of antitrust analysis to distinguish the fundamental economic analysis of network practices from the analysis of horizontal and vertical industrial practices.


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