Kerber, Wolfgang --- "Competition, Innovation and Maintaining Diversity through Competition Law" [2011] ELECD 346; in Drexl, Josef; Kerber, Wolfgang; Podszun, Rupprecht (eds), "Competition Policy and the Economic Approach" (Edward Elgar Publishing, 2011)

Book Title: Competition Policy and the Economic Approach

Editor(s): Drexl, Josef; Kerber, Wolfgang; Podszun, Rupprecht

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848448841

Section: Chapter 9

Section Title: Competition, Innovation and Maintaining Diversity through Competition Law

Author(s): Kerber, Wolfgang

Number of pages: 29

Extract:

9. Competition, innovation and
maintaining diversity through
competition law
Wolfgang Kerber*

1. INTRODUCTION

Market competition is a very complex phenomenon, which has many
dimensions. Modern game-theoretic industrial economics is a powerful
analytical tool for studying important aspects of markets and competition.
However, it does not deal with all essential dimensions of competition
processes in dynamic market economies. In a recent small article with the
title `Complexity, Diversity, and Antitrust' Farrell (2006) asks whether
antitrust should protect diversity in situations where the complexity is too
high to have reliable information about the right solutions. As an example,
he uses the decision of collaborating drug companies to stop the develop-
ment of a promising drug for peanut allergy treatment by one of the firms
in favour of an already existing drug of one of the other companies. Would
not the higher diversity of pursuing both approaches be one of the benefits
of competition and should not `antitrust seek to protect such diversity'
(ibid, 166)? Farrell insists on the importance of a variety of experiments
and claims that this `econodiversity' is one of the crucial benefits of com-
petition. Since it is hard to pin down and prove, he calls it the `dark matter
of competition' (Farrell 2006: 168­169).
It was Hayek (1948, 1978) who first clearly emphasized this dimension
of competition with his concept of `competition as a discovery procedure'.
Starting with the assumption that the best solutions are often not yet
known, competition is viewed as an evolutionary trial ...