Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits

Naturally, competition policy is based on competition economics made applicable in terms of law and its enforcement. Within the different branches of competition economics, modern industrial economics, or more precisely game-theoretic oligopoly theory, has become the dominating paradigm both in the U.S. (since the 1990s Post-Chicago movement) and in the EU (so-called more economic approach in the 2000s). This contribution reviews the state of the art in antitrust-oriented modern industrial economics and, in particular, critically discusses open questions and possible limits of basing antitrust on modern industrial economics. In doing so, it provides some hints how to escape current enforcement problems in industrial economics-based competition policy on both sides of the Atlantic. In particular, the paper advocates a change of the way modern industrial economics is used in competition policy: instead of more and more case-by-cases analyses, the insights from modern industrial economics should be used to design better competition rules. I like to thank the co-panelists Laurence Idot, Michele Polo and Daniel Rubin-feld as well as all the participants of the conference “Foundations and Limita-tions of an Economic Approach to Competition Law” (Max-Planck-Institute for Intellectual Property, Competition and Tax Law; Munich 12th / 13th March 2009), Arndt Christiansen and Nadine Lindstädt for very valuable and helpful comments.