Behavioral Economics and Its Meaning for Antitrust Agency Decision Making

Abstract

Of all fields of regulation in the United States, antitrust law relies most heavily on economics to inform the design and application of legal rules. When drafting antitrust statutes in the late 19th and early 20th centuries, Congress anticipated that courts and enforcement agencies would formulate and adjust operational standards to account for new learning. The field of economics — especially industrial organization economics — would give broad statutory commands much of their analytical content.

In principle, the flexibility of U.S. antitrust statutes makes competition policy adaptable and accommodates for upgrades over time. This evolutionary process is only effective if antitrust institutions can identify significant advances in economic learning and refine enforcement policy and doctrine accordingly. Owing to their expertise in economics and law, the two federal antitrust agencies — the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) — are crucial instruments of adaptation. The antitrust system’s quality depends on the agencies’ commitment to reassess existing doctrine and policy in light of new developments.

Keywords: Amos Tversky, Bayesian, Cass Sunstein, Christine Jolls, Coasian, Continental T.V., Inc. v. GTE Sylvania, confirmation, Daniel Kahneman, David Laibson, Farina, Hayek, Korobkin, Rachlinski, regulators, Ronald Coase, Schwinn, status quo bias, Stefano DellaVigna, Ulen, Ulrike Malmendier, Xavier Gabaix

JEL Classification: C11, C12, D21, D23, K21, L42, L44, L51, R38