Antitrust Policy Toward Innovation Competition: Measuring Dynamic Efficiency

Economic analysis of dynamic efficiency is essential for antitrust policy. I argue that measuring dynamic efficiency is feasible for antitrust policy makers. I introduce the concept of the innovative delta as a measure of dynamic efficiency. The innovative delta measures the welfare effects of an observed technological change. In merger policy, a positive innovative delta could provide an efficiency defense for a merger, whereas a negative innovative delta could indicate harm. The innovative delta also supports a rule of reason approach to innovation competition.