Innovation and the Limits of Antitrust

Frank Easterbrook’s seminal analysis of error-cost minimization in «The Limits of Antitrust» has special relevance to antitrust intervention in markets where innovation is a critical dimension of competition. The authors discuss some principles for applying Easterbrook’s error-cost framework to innovation. Then they discuss the historical relationship between antitrust error and innovation. They conclude by challenging the conventional wisdom that the error-cost approach implies that the rule of reason, rather than per se rules, should apply to most forms of business conduct. Instead one must identify simple filters to harness existing economic knowledge to design simple rules that minimize error costs.