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New Technology and Increasing Returns: The End of the Antitrust Century?

Author

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  • Basu, Kaushik

    (World Bank)

Abstract
The advance of digital technology is changing the nature of markets, enhancing the capacity of corporations to extract more consumers' surplus and lower the wages paid to workers. The rise of new technology has also diminished the efficacy of traditional laws to regulate firms and corporations. This is best illustrated by antitrust laws. With the new technology, there is greater returns to scale in production, and further, it is possible to have different components of the same final good be produced by different firms in faraway places. Unlike in earlier times the n firms in one industry, say the automobile industry, would all be producing cars, now the n firms in that industry produce n different parts of the product, thereby getting enormous returns to scale. Such markets are described as vertically serrated markets and their equilibria are characterized. Traditional antitrust law does not apply to these markets because the high returns to scale are natural and not artificially induced. This compels us to look for novel ways to regulate such markets. This paper discusses, in particular, laws that compel firms to have widely dispersed share holdings.

Suggested Citation

  • Basu, Kaushik, 2019. "New Technology and Increasing Returns: The End of the Antitrust Century?," IZA Policy Papers 146, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izapps:pp146
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    File URL: https://docs.iza.org/pp146.pdf
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    References listed on IDEAS

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    Cited by:

    1. Richard Sturn, 2021. "Der Staat heute: Marktversagen und die Voraussetzungen öffentlicher Handlungsfähigkeit," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 47(1), pages 15-39.
    2. Richard Sturn, 2020. "Präventive Handlungsfähigkeit des Staates im 21. Jahrhundert [Public Agency Capabilities and Transformational Challenges of the 21st Century]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 100(7), pages 531-537, July.

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    More about this item

    Keywords

    antitrust law; share distribution; technological advance; labor demand;
    All these keywords.

    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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