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434. Antitrust in Innovative Industries: the Optimal Legal Standards
by Giovanni Immordino and Michele Polo

We study the interaction between a firm that invests in research and, if successful, undertakes a practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In innovative industries deterrence on actions interacts with deterrence on research. A per-se legality rule prevails when the practice increases expected welfare, moving to a discriminating rule combined with type-I accuracy for higher probabilities of social harm. Moreover, discriminating rules should be adopted more frequently in traditional industries than in innovative environments; patent and antitrust policies are substitutes; additional room for per-se (illegality) rules emerges when fines are bounded.

Keywords: legal standards, accuracy, antitrust, innovative activity, enforcement.

JEL classification: D73, K21, K42, L51.

Last updated May 3, 2012