Daubert, Science, and Modern Game Theory: Implications for Merger Analysis

Abstract

To be admissible in federal court under the Daubert standard, expert economic testimony must be (1) based on scientific analysis and (2) aid the dispute resolution process. Expert evidence should be considered scientific when (1) it meets Karl Popper’s falsification standard and (2) some evidence compatible with the scientific proposition is provided. Standard competitive and monopoly models are well supported in the literature and therefore would generally meet this standard, while structuralism clearly fails the test. Modern game theoretic analysis focuses on either collusion (coordinated interaction) or unilateral effects but only raises the possibility of a merger-related competitive problem and thus must be supported with case-specific evidence to be considered scientific. Economic evidence underpinning game theoretic analysis can involve either a “systematic” study of competition in a market or a narrow “shock” analysis of a specific economic event. When both parties to a merger dispute provide evidence admissible under the Daubert standard, the court must resolve the scientific dispute in the decision on the merits.

Keywords: Daubert, Economic experts, Merger policy, Philosophy of science, Post-Chicago economics, Economic methodology, Falsification

JEL Classification: A12, B41, K21, K41, L40