CPI Talks… with Catherine Tucker

In this edition of CPI Talks we have the pleasure of speaking with Catherine Tucker, the Sloan Distinguished Professor of Management and a Professor of Marketing at MIT Sloan. She is also Chair of the MIT Sloan PhD Program.

Thank you, Professor Tucker, for taking this time to talk to CPI.

 

1. Is the breaking up of a company ever viable as an antitrust remedy? What has the historical experience taught us thus far?

As an undergraduate in economics, I was reared on stories of breaking up natural monopolies. Indeed, the industrial organization of the 1980s and 1990s was focused on questions of whether you could take a natural monopoly and make it more efficient by breaking it up.

The economics underlying breakup remedies, when it came to the apparent natural monopolies of the 1980s, was reasonably straightforward. The argument was that there were natural economies of scale in erecting and maintaining phone lines, for example. This implied that the existing incumbent would always have a sustained competitive advantage over an entrant.

Typically, the rationale now given for the breakup of platforms is that there are network effects that lead to a natural monopoly. I have written extensively why this viewpoint does not reflect the empirical literature in economics on the nature and scope of network effects.

However, even if one ignores this empirical literature, and tries to make the case that network effects do lead to natural monopoly, the underlying nature of the econ

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