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One perspective for understanding competition that has garnered increased attention by those in antitrust is the field of science known as “complexity science.” Incorporating insights and relying on metaphors from population ecology, evolutionary biology, systems theory, chaos and the study of networks, the science of complexity attempts to describe and explain how systems and their occupants, including industries and firms, evolve and compete against one another over time through adaptation, co-evolution and other dynamic processes.
Insights from complexity science are being applied to describe and better understand the evolution and competition taking place in various sectors and industries of the “new economy.” Complexity science has also influenced the study of business management more generally where it is part of a movement in the study of marketing and strategic management that is beginning to shift its focus from the firm to the dyad of relationships between two firms, to the system level in which broader networks of firms and relationships operate. Across these contexts, this body of thought has yielded insights for describing and understanding phenomenon that appear relevant to antitrust including defining market and product space, understanding firm dominance, strategies of competitive advantage, predation, the adoption and diffusion of innovation and synergies in mergers and acquisitions.
Although the integration of knowledge gained through the study of the science of complexity to antitrust remains to be more fully developed, initial findings have yielded some provocative insights. For example, networks may be different from antitrust markets, encompassing multiple markets or even industries. This challenges standard neoclassical antitrust economics, whose focus is the “relevant” market, where the primary test of membership is substitutability. Within some networks, huge market power may be accrued, even when the size of the dominating firm is relatively small within the system, a possibility that cuts against the concentration thesis of neoclassical antitrust economics, which only recognizes market power in the context of very large market shares. The network phenomenon calls attention to the importance to competition of relationships of power and influence that tend to be more familiar to business people and political scientists than to neoclassical economists.
The question of whether complexity science can contribute to antitrust has also been brought into sharp focus through the workings of the Antitrust Modernization Commission, a statutory study commission that is beginning to explore whether industries involving significant technological innovation should be treated differently under the antitrust laws and, whether there are features of the modern (or “new”) economy that warrant special antitrust treatment – whether harsher or more lenient.
In an effort to initiate dialogue concerning complexity science and antitrust, the American Antitrust Institute will host a Roundtable on Complexity, Networks, and the Modernization of Antitrust to be held June 20, 2005, at the National Press Club, Washington DC. The Roundtable will include interactive presentations and panel discussions by leading experts in the field of complexity science together with experts in antitrust, economics and business, key policymakers, and knowledgeable practitioners. Seating is limited. Attendees will be expected to participate through question and answer sessions.
The event is being sponsored by the American Antitrust Institute in collaboration with the Antitrust Bulletin, CRA International, Coggin College of Business (University of North Florida), Shorewater Advisors, Sun Microsystems, XO Communications, and others.
The papers generated from this symposium were published in the The Journal of American and Foreign Antitrust and Trade Regulation Volume 51, Number 1, Spring 2006
Special Issue: Complexity, Networks, And The Modernization Of Antitrust
Gregory T. Gundlach and Albert A. Foer, Guest Editors
Albert Foer, President, American Antitrust Institute
Complexity Science and Antitrust?
Gregory Gundlach, Senior Fellow, AAI and Visiting Eminent Scholar of Wholesaling, Coggin College of Business, University of North Florida
Perspectives on the Application of Complexity Science to Competition and Business Strategy
The Complexity of Firm Relationships — What It Means for Competition
James Moore, GeoPartners Research Inc.
New Dynamics of Business Systems — Implications for Strategy and Policy
Marco Iansiti, David Sarnoff Professor of Business Administration, Harvard Business School
Perspectives on the Application of Complexity Science to Business Management and Marketing Strategy
Understanding and Managing in Complex Business Networks – A New Understanding
Hakan Hakansson, NEMI Professor of International Management, Norwegian School of Management
Strategy Development in Complex Business Networks – Normative Insights
Ian Wilkinson, Professor, University of New South Wales
Joseph Farrell, University of California, Berkeley, USA and past Deputy Assistant Attorney General and Chief Economist, Antitrust Division, US Department of Justice
Translations: Implications of Complexity Science for Competition Policy and Antitrust
Paul Dobson, AAI and Professor of Competition Economics, Loughborough University School of Business
Thomas Horton, Partner, Orrick, Herrington & Sutcliffe LLP
Rudolph J.R. Peritz, Senior Fellow, AAI and Professor, New York Law School
Harry First, Professor, New York University Law School
Albert Foer, AAI
Gregory Gundlach, AAI