Antitrust, the Internet, and the Economics of Networks

Posted by Social Science Research Network

Antitrust, the Internet, and the Economics of Networks – Daniel F. Spulber (Northwestern University – Kellogg School of Management and Christopher S. Yoo (University of Pennsylvania Law School; University of Pennsylvania – Annenberg School for Communication; University of Pennsylvania – School of Engineering and Applied Science)

ABSTRACT: Network industries, including the Internet, have shown significant growth, substantial competition, and rapid innovation. This Chapter examines antitrust policy towards network industries. The discussion considers the policy implications of various concepts in the economics of networks: natural monopoly, network economic effects, vertical exclusion, and dynamic efficiency. Our analysis finds that antitrust policy makers should not presume that network industries are more subject to monopolization than other industries. We find that deregulation and the strength of competition in network industries have removed justifications for structural separation as a remedy. Also, we argue that that deregulation and competition have effectively eliminated support for application of the essential facilities doctrine. Antitrust policy in network industries should be guided by considerations of dynamic efficiency.