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A Unified Framework for Competition Policy and Innovation Policy

By  |  December 16, 2013

Posted by Social Science Research Network

A Unified Framework for Competition Policy and Innovation Policy by Keith N. Hylton (William Fairfield Warren Distinguished Professor, Boston University ; Professor of Law, Boston University School of Law)

ABSTRACT: I describe a model of competition law enforcement that treats competition and innovation policy as the inseparable partners they ought to be. The enforcement authority determines an optimal punishment knowing that if it sets the penalty too high it will reduce firms’ incentives to invest in innovation, and if firms do not invest, new goods and new markets will not be created. The authority therefore moderates the penalty in order to maintain innovation incentives. The implications of this framework for competition policy and for innovation policy are quite different from what is commonly observed today. I discuss implications for competition law enforcement, standard essential patents, and the Supreme Court’s decision in FTC v. Actavis.