Competition and industrial policy in the 21st century

Abstract

Abstract Large fixed costs and (direct and indirect) network externalities generate barriers to entry and high markups for winners in the digital industry. The potential for high prices, low innovation and abuses of dominant position as well as the contribution to rising inequality raise the question of how countries should regulate the industry. The tech giants’ dominance does not confront us with an unpalatable choice between laissez-faire and populist interventions. The commentary explains economic stakes, considers desirable adaptations of regulation in the digital age and draws some conclusions for policy reform.