The Friction Paradox: Intermediaries, Competition, and Efficiency

Research output: Contribution to journalArticlepeer-review

Abstract

Commentators sometimes say that the elimination of impediments to trade—namely, market friction—tends to expand trade and foster competition. This casual assumption is known to be erroneous. Antitrust law recognizes that restraints of trade—which are forms of market friction—are often pro-competitive and frequently have both pro- and anticompetitive effects. Accordingly, antitrust law prohibits unreasonable restraints of trade, but not all restraints of trade. Trust-busting advocates promote a different approach to market friction. They argue that the antitrust laws intend to maintain fragmented industries and favor small businesses. This approach, which has been embraced by the antitrust agencies in recent years, implies that high-friction markets are more competitive than low-friction markets. It is an expression of a phenomenon that can be called the “ friction paradox ”: the elimination of market friction is desirable until this goal is accomplished. Notable examples of the friction paradox include hostility toward new generations of market intermediaries, such as supermarkets, chain stores, department stores, big-box stores, digital platforms, and digital ecosystems. This article observes that antipathy for large intermediaries results in a willingness to sacrifice the core benefits of competition—low prices, convenience, efficiency, and innovation. It, therefore, argues that antitrust expressions of the friction paradox place competition policy at war with itself.

Original languageEnglish (US)
Pages (from-to)234-249
Number of pages16
JournalAntitrust Bulletin
Volume68
Issue number2
DOIs
StatePublished - Jun 2023

Keywords

  • antitrust
  • competition policy
  • friction
  • intermediaries

ASJC Scopus subject areas

  • Economics and Econometrics
  • Law

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