Competition Policy in Network Industry

usNET Institute* www.NETinst.org Working Paper #04-23
Revised June 2004
Competition Policy in Network Industries: An Introduction
Nicholas Economides
Stern School of Business, New York University

* The Networks, Electronic Commerce, and Telecommunications (“NET”) Institute, http://www.NETinst.org, is a non-profit institution devoted to research on network industries, electronic commerce, telecommunications, the Internet, “virtual networks” comprised of computers that share the same technical standard or operating system, and on network issues in general.

Competition Policy In Network Industries:
An Introduction*
By Nicholas Economides**
June 2004
Abstract
We discuss issues of the application of antitrust law and regulatory rules to network industries. In assessing the application of antitrust in network industries, we analyze a number of relevant features of network industries and the way in which antitrust law and regulatory rules can affect them. These relevant features include (among others) network effects, market structure, market share and profits inequality, choice of technical standards, relationship between the number of active firms and social benefits, existence of market power, leveraging of market power in complementary markets, and innovation races. We find that there are often significant differences on the effects of application of antitrust law in network and non-network industries.
Key words:

networks, network effects, public policy, antitrust, telecommunications, technical standards

JEL Classification: L4. L5

* I thank Brian Viard, Larry White and the participants at the conference “The New
Economy: Just How New is It?” at Texas A&M for their helpful comments and suggestions. ** Stern School of Business, New York University, New York, NY 10012, (212) 9980864, fax [phone], http://www.stern.nyu.edu/networks/, e-mail: [e-mail]. Competition Policy In Network Industries: An

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