Competitive analyses of mergers, tying, bundled pricing, and other types of business practices typically involve an empirical analysis, as well as the application of an economic theory that captures the dynamics of the marketplace. However, those dynamics can be complex. In some markets, technological links may create switching costs for consumers. In other markets, the rivalry between competitors may be driven by the desire to win subsequent sales in an aftermarket or by network effects and the prospect of winning the entire market.

In this chapter from Economics of Antitrust: Complex Issues In a Dynamic Economy, the authors explain the dynamics of markets that are characterized by switching costs, aftermarket competition, and network effects. In these markets, the assessment of competition over time is a critical aspect of the analysis. For example, at first sight, it may appear relatively clear that the presence of switching costs would dampen competition. However, a dynamic analysis of the full life cycle of the product at issue may reveal how and why competition can be fierce, even if there are switching costs. Similarly, a competitive analysis of products that are part of a larger operating system requires consideration of system-level competition and pricing for all components of the system. A comprehensive and dynamic analysis of these markets therefore requires an equally sophisticated economic framework.