1. INTRODUCTORY REMARKS

Over the past decades, there have been fads and fashions in competition theory but there has also been substantial development. Three developments are particularly noteworthy: (1) the challenge posed by contestability theory to the structureconduct-performance approach, (2) the application of game theory to issues of competition and (3) the rise of the New Institutional Economics with its emphasis on the relevance of organisational structures and their consequences for competitive behaviour. In this chapter, an attempt will be made at spelling out possible implications of these three developments for competition policy. This theoretical framework will later be used to evaluate the EU merger policy as it is currently practiced.

Before describing these three more recent developments in sections 3, 4, and 5 of this chapter, the so-called “structure-conduct-performance” paradigm will shortly be described and critically evaluated. This has been done many a time and we do not claim to add any new or original insights here. Yet, it is important to clarify some of the basic assumptions of this approach because it has been of overwhelming importance. Although it has been heavily criticised on various grounds, its core ideas still loom large in many competition authorities. After shortly presenting some of the insights of the so-called “Chicago school” in section two, we turn to the three developments just alluded to.