The Empty Promise of Behavioral Antitrust
55 Pages Posted: 29 Sep 2013 Last revised: 17 Sep 2015
Date Written: September 27, 2013
Microeconomic theory has long guided competition law. Using price- and game-theoretic models, antitrust has settled on rules that have endured because they are more coherent, easier to understand, and simpler to apply than any other methodology. In application, those rules predict the market consequences of business transactions innumerable in form and uncertain in outcome. But this coherent framework is now under attack. Entranced by the larger “behavioral law and economics” movement, certain academics have questioned the pillars of doctrine built upon the foundation of rational-choice theory. On their view, bounded rationality, willpower, and self-interest afflict firms’ and consumers’ decision making, inducing systemic departures from the predictions of neoclassical economics and game theory. Current antitrust laws, they argue, fail to account for those departures from rationality. Since these rules and standards produce what they regard as unduly permissive treatment, behavioral-antitrust scholars urge more-interventionist policy.
This Article contends that, whatever its virtues for the larger field of law and economics, behavioral economics can play no useful role in contemporary antitrust policy. It is hopelessly vague, untethered to a theory, and reliant on biases that routinely operate in opposing directions. While it can sometimes describe the past, it is incapable of predicting the future: a fatal shortcoming for any method of antitrust analysis. We test whether behavioral antitrust can produce a coherent theory for predicting the market effects of impugned restraints on trade and exclusionary conduct. In doing so, we show that the biases prove either too much — all results are possible — or too little, canceling themselves out and reverting to the (rational) mean. The suggested utility of behavioral antitrust depends entirely upon which biases are thought to explain the conduct in question. But since the movement lacks any method for determining the explanatory power of a particular bias ex ante, choosing between conflicting biases is either a random act or a political one.
We also show what the behavioralists must be loath to mention. Despite the claimed empirical superiority of behavioral antitrust, the psychological literature has failed to supply it with the evidence or theory critical for its application. That is the frequency with which, and the situations when, one set of biases dominates others. Without this key bit of inductive fact or deductive logic, all that remains of the approach is conjecture, at best, or cynical manipulation. We conclude that the behavioral movement is a non-event for antitrust policy today.
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