Constructed Preferences, Consumer Welfare, and Antitrust Law

Abstract: Scholars and enforcement officials debate the merits and implications of “behavioral antitrust”—the application of empirical evidence showing how human behavior departs systematically and predictably from strict rationality (“bounded rationality”) to antitrust law. Notwithstanding their many disagreements, both sides in this debate recognize that consumers—as opposed to business firms and their managers—are boundedly rational. Indeed, behavioral and consumer research show that consumer choice is often constructed ad-hoc during the process of choice and shaped by context-specific influences. Yet if consumer choice and the resulting aggregate demand do not reflect consumers’ authentic, preexisting preferences—and thus do not maximize individual and aggregate welfare—is there an economic justification for antitrust law? The Article examines this challenge closely, determines its scope and offers a number of responses to it. Ultimately, the analysis shows that a more modest version of the standard economic justification for antitrust law largely weathers the challenge. The Article concludes by considering the implications of the analysis for antitrust doctrine and enforcement policy.