Why Does the Consumer Welfare Standard Work? Matching Methods to Markets

Abstract

We suggest that consumer welfare is the appropriate standard for antitrust analysis across an array of industries. Unlike critiques that treat consumer welfare as a caricature within a simplistic early-1970s framework of “Chicago School” economics, we suggest that consumer welfare, as understood today, adapts to changes in economic thinking and industry dynamics. Changes in economics lead to different legal presumptions. When shifts occur in economic understanding, this may lead to a reevaluation of the legal presumption underlying the behavior in question and the potential need for a more nuanced treatment of certain conduct under the rule of reason. Because economic analysis allows for more precision and objectivity than "fairness," we believe that it is important to highlight case examples that show how economic analysis has shifted over time in ways that both promote enforcement and limit enforcement. All too often, the populist narratives of antitrust overlook such flexibility and the evolution in economic thinking, where practitioners have applied new theories and approaches to new settings.

Keywords: antitrust, competition policy, industrial organization

JEL Classification: L40, k21