Springer Competition, Innovation, and Antitrust: A Theory of Market Leaders and Its Policy Implications

This book reviews recent progress in the theory of oligopoly and market leadership and provides new results on the theory of Stackelberg competition and Nash competition with strategic investment under endogenous entry. These theories are applied to models of competition in quantities, prices and to patent races. The results are used to propose a new approach to competition policy and issues of the abuse of dominance. Review From the reviews:"Etro’s Competition, Innovation and Antirust is a remarkable and quite unique piece of work … . any serious future scholarly article or textbooks that deal with competition and market structures or antitrust issues will have to cite, and that any serious and conscientious teacher of industrial organization should recommend as reading to their students. Needless to say, the book is already playing a prominent role on my upgraded syllabus for the graduate course of industrial organization for this academic year." (Krešimir Žigic, European Competition Journal, Vol. 3 (2), 2007)"The key insight that forms the backbone of this book by Federico Etro … is that a market leader faced with endogenous entry, subsequent to the leader’s output decision, can produce enough to deter entry, thus giving rise to a limit price and high overall market performance. … The book also offers a nice historical perspective on both the relevant theoretical foundations and the extant policy debates on antitrust issues, which is likely to be useful to young scholars." (Rabah Amir, www.intertic.org, March, 2008)"In this innovative and thoughtful book, Federico Etro provides a novel approach to competition policy in innovative industries. Building on the notion of Stackelberg equilibrium with endogenous entry, which he has himself contributed to develop, he highlights the crucial role of potential competition in research in determining market performance. … This book will be of great value to scholars and visionary practitioners, and may hopefully have a large impact on policy." (Vincenzo Denicolo, www.intertic.org, March, 2008)"This book explores the role of leadership in the economic theory of oligopoly, both for static oligopoly and for dynamic patent race games of R&D. It provides valuable service in reviewing existing models and extending them to careful consideration of the role of the first mover; in particular, to allowing for the leader to take into account the effects of its actions on entry and hence subsequent market structure. I thoroughly enjoyed its refreshing perspective." (Simon Anderson, www.intertic.org, March, 2008) From the Back Cover Competition, Innovation, and Antitrust develops a theory of market leadership in the presence of endogenous entry of firms and applies it to models of competition in the market and for the market. On this basis, the author provides a new approach to antitrust policy which is in support of the Chicago school but founded on a solid game-theoretic framework. The analysis is applied to the study of market leadership in the New Economy and of the recent antitrust cases involving Microsoft.Federico Etro is Associate Professor of Economics at the University of Milan, Bicocca, and President of the International Think-tank on Innovation and Competition. He has publications on leading international journals as The American Economic Review, The RAND Journal of Economics, The Economic Journal and others, and is a consultant for international organizations and companies on industrial and antitrust policy. This book explores the role of leadership in the economic theory of oligopoly, both for static oligopoly and for dynamic patent races. I thoroughly enjoyed its refreshing perspective. Simon Anderson, University of VirginiaThe simple but fundamental result on aggressive pricing by leaders facing endogenous entry, which has eluded researchers on the foundations of industrial organization so far, is bound to have a significant impact on the