Conditions Vary across Markets? THE NUMBER OF FIRMS in a market is a primary determinant of market concentration and performance. In the long run the number of firms is affected by the ease with which they can enter and exit. Many recent theoretical models of entry have emphasized that strategic behavior by incumbents may have an important bearing on the number of firms that enter the market. For instance, these models illustrate how the extent of postentry competition and opportunities for erecting strategic entry barriers might affect the likelihood that another firm will enter a market.1 In contrast to these strategic models, other models of the long-run number of firms emphasize that technological factors, such as economies of scale, determine entry. These theories minimize the importance of strategic behavior in the long run and instead emphasize that highly concentrated industries are simply ones for which few firms will fit given the degree of returns to scale.
The U.S. Congress is currently considering several bills to alter the antitrust treatment of collaborative production activities among rival firms. This paper sketches the tradeoffs involved in altering U.S. antitrust treatment of joint venture production activities among rival firms. This requires understanding the nature, benefits, difficulties and dangers to competition of production joint ventures; identifying their degrees of prevalence in the U.S. and elsewhere; summarizing the current antitrust treatment of joint ventures; and analyzing the interactions between U.S. competitiveness and antitrust treatment of production joint ventures. We discuss these topics below, after which we assess some proposed alterations to the antitrust treatment of production joint ventures. We conclude that current antitrust law and enforcement policy with regard to production joint ventures are working quite well and hardly can be considered a hindrance to innovation or “competitiveness.” We support some modest changes in antitrust law that may serve to encourage pro-competitive joint production ventures, but we do not endorse the more sweeping legislative changes by Jorde and Teece in this issue.
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