Antitrust Chronicle^® – Economics of Potential Competition

Dear Readers,

Potential (as opposed to “actual”) competition is defined, essentially, as a competitive constraint on a given firm’s behavior that might “potentially” arise, but has not done so yet. Modern economic thinking places increasing importance on taking potential competition into account in assessing antitrust issues.

How is potential competition defined? For example, it might be most evident where the entrant poses a threat based on a particularly disruptive innovation, an inn