Implications of Behavioral Antitrust
Abstract: Behavioral economics is mainstream and timely. The economic crisis raised important issues of market failure, weak regulation, moral hazard, and our lack of understanding about how many markets actually operate. As behavioral economics (with its more realistic assumptions of human behavior) goes mainstream in academia and the business world, one expects lawyers and economists to bring the current economic thinking to the competition agencies and courts. How should the courts and competition agencies respond? This paper examines how courts and competition authorities can consider the implications of behavioral economics on four levels: first as a gap filler, i.e., to help explain “real world” evidence that neoclassical economic theory cannot explain; second to assess critically the assumptions of specific antitrust policies, such as merger review and cartel prosecutions; third to revisit three fundamental antitrust questions, namely what is competition, what are the goals of competition law, and what should be the legal standards to promote those goals; and fourth, to assess how behavioral economics will affect the degree of convergence/divergence of competition law among the over 100 jurisdictions with competition laws today.
