S. Salop, here.
From what I have seen, this "modern" economic analysis certainly moves beyond a narrow focus on price. It takes innovation, quality, variety, entry and dynamic effects much more seriously, and it is far more sceptical than the Chicago tradition of claims that monopoly necessarily promotes innovation.
Yet it still appears to remain fundamentally efficiency-based. Competition, diversity and market openness matter chiefly because they are expected to generate better welfare outcomes. This means that exclusion may still be justified if the dominant firm can show sufficiently large efficiencies and persuade the decision-maker that those efficiencies outweigh the loss of rivalry.
That is precisely where a much deeper change of paradigm is needed. The issue should not merely be whether a single gatekeeper can organise the market more efficiently than a plurality of competing actors. It should also be whether one private firm ought to possess the power to determine the entire structure of market access, the permissible forms of innovation and the conditions under which others may compete.
Contestability, diversity and independent routes to market should therefore not be treated simply as variables in an efficiency balance. They are constitutive elements of a competitive order. The objective should not be merely to maximise welfare within a market structure controlled by the incumbent, but to preserve the possibility of decentralised experimentation, rival forms of organisation and challenges to the incumbent’s model.
In that sense, this type of newish economic analysis is not yet the necessary paradigm shift. It offers a more sophisticated balancing exercise when what may be required is a structural presumption against private control over the architecture of competition itself.
Yet it still appears to remain fundamentally efficiency-based. Competition, diversity and market openness matter chiefly because they are expected to generate better welfare outcomes. This means that exclusion may still be justified if the dominant firm can show sufficiently large efficiencies and persuade the decision-maker that those efficiencies outweigh the loss of rivalry.
That is precisely where a much deeper change of paradigm is needed. The issue should not merely be whether a single gatekeeper can organise the market more efficiently than a plurality of competing actors. It should also be whether one private firm ought to possess the power to determine the entire structure of market access, the permissible forms of innovation and the conditions under which others may compete.
Contestability, diversity and independent routes to market should therefore not be treated simply as variables in an efficiency balance. They are constitutive elements of a competitive order. The objective should not be merely to maximise welfare within a market structure controlled by the incumbent, but to preserve the possibility of decentralised experimentation, rival forms of organisation and challenges to the incumbent’s model.
In that sense, this type of newish economic analysis is not yet the necessary paradigm shift. It offers a more sophisticated balancing exercise when what may be required is a structural presumption against private control over the architecture of competition itself.
The central distinction is between better balancing within the welfare paradigm and treating plurality, contestability and dispersed power as values that cannot be traded away for claimed efficiencies.
What is needed is a true modern (new) competition school, not just an incremental fixing of the same, inadequate economic paradigm.
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