Can Antitrust Law Incorporate Insights from Behavioral Economics?
Abstract: The Chicago School of law and economics revolutionized antitrust law. By applying insights from microeconomics, scholars associated with the Chicago School introduced more rigor into antitrust analysis. Antitrust law is now viewed through an economics lens. Today, it is essentially impossible to practice antitrust law without understanding several economic concepts. The field of economics, however, has evolved in ways that undermine many of the fundamental insights of the Chicago School. This paper explores how behavioral economics has improved upon the basic microeconomic models that have been so influential in antitrust jurisprudence over the past few decades. The insights from behavioral economics challenge the policy prescriptions associated with the Chicago School. The traditional form of Law and economics associated with the Chicago School argues that many aspects of antitrust law are unnecessary because business decision-makers are rational and markets are self-correcting. According to this theory, firms do not engage in costly anticompetitive conduct. Behavioral economics identifies several ways in which individuals – and firms – deviate from so-called rationality. The lessons from behavioral economics demonstrate how antitrust enforcement can make markets more efficient than a strict laissez-faire approach. Behavioral economics represents a refinement and improvement over traditional microeconomics. Unfortunately, courts may be resistant to incorporating the insights from behavioral economics into antitrust jurisprudence. This paper explores why. The reasons include the relative simplicity of basic microeconomics compared to the more nuanced explanation of business behavior offered by behavioral economics. The paper examines some of the benefits of including behavioral economic concepts in antitrust analysis and the barriers to doing so. It argues for less reliance on theory and greater appreciation of facts.
