Understanding Behavioral Antitrust

Question

1. What contributions have the authors mentioned in the paper "Understanding behavioral antitrust" ?

2. What can economists do to help them develop more effective antitrust rules?

3. Why do some managers act more procompetitively than standard models?

4. What is the role of the market participants in identifying their judgment and decision errors?

Accepted Answer

This Article shows, however, that both proponents and opponents of behavioral antitrust frequently and fundamentally misconstrue its methodology, treating concrete empirical phenomena as if they were broad hypothetical assumptions.. After establishing the central role of rationality assumptions in present-day antitrust and reviewing illustrative behavioral analyses across the field—from horizontal and vertical restraints, through monopolization, to merger enforcement practices—the Article examines the three classes of mistakes, their manifestation and their consequences in antitrust scholarship.. Besides providing guidance to future behavioral antitrust scholarship, the Article concludes by discussing two sets of essential lessons that the behavioral approach already can offer to advance antitrust law and policy:. Earlier versions of this Article benefited from comments and criticisms of Louis Kaplow, Bruce Kobayashi, Steve Salop, Daniel Sokol, Josh Wright, and participants at the 2012 Annual Conference of the American Association of Law Schools ( AALS ), the 2012 ABA / NYU Law School Next Generation of Antitrust Scholarship Conference, the 6o th Annual Meeting of the ABA Section of Antitrust Law, the 29 th Annual Meeting of the European Law and Economics Association ( EALE ), the 2013 Annual Meeting of the American Law and Economics Association ( ALEA ), and the 2013 Annual Meeting of the International Society for New Institutional Economics ( ISNIE ), as well as seminar participants at the Copenhagen Business School Law Department, the Max Planck Institute for Research on Collective Goods, the Hebrew University of Jerusalem Faculty of Law, and the Harvard Law School Law and Economics Workshop.. Christopher Kieser, John Lindermuth, Geoffrey Miller, Lauren Riley, and Jessica Williams provided excellent research assistance at different stages of this project.

Accepted Answer

beyond assisting in choosing and fashioning more effective antitrust rules, behavioral regularities can be used as stylized facts, allowing economists to develop more accurate models and predictions of market behavior.

Accepted Answer

Whetherthey exhibit more law-abiding behavior because of moral considerations, due to social norms, or for fear of the extra-legal costs associated with criminal conviction, real-world, boundedly rational managers may act in this case more procompetitively than standard antitrust models assume.

Accepted Answer

Effectivelearning requires market participants to identify their judgment and decision errors, to associate these errors with specific negative consequences and, finally, to replace them with more rational judgments and decisions.

Accepted Answer

because market conditions make recoupment of the costs invested in predation unlikely—can generate significant competitive harm where areal monopolist is (or is perceived to be) irrationally aggressive in the face of new entry.

Accepted Answer

When predicting the likelihood of post-merger coordination, however, the agencies routinely rely on the traditional, rationality-based, economic view of the conditions necessary for effective collusion to distinguish mergers that raise coordinated effects concerns from those that do not.

Accepted Answer

As the proportion of its sophisticated consumers increased, for instance, Kodak would have needed to dissipate more of its aftermarket profits, to keep the copiers attractive to this group in the primary market.

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because proponents who treat behavioral phenomena as broad assumptions instead of concrete evidence tend to overstate the anticompetitive harm of deviations fromassumptions of rationality.

Accepted Answer

In the merger area, due to the parties‘ strong incentives to overstate future efficiencies, as well as the strong tendency otherwise to overestimate them, and given the evidence of the high frequency of unsuccessful mergers, the agencies should not simply assume that proffered merger efficiencies will materialize in fact.

Accepted Answer

In the film industry, however, ambiguity is so pervasive that an aversion to it is unlikely to play a significant role in the selection of vertical contracting practices, unlikeconcerns about risk, opportunistic behavior and more that may well favor relational contracting in this setting.

Accepted Answer

35Because it adopted the rationality assumption, the Supreme Courtconcluded that predatory pricing schemes only rarely are tried and even more rarely are successful.

Understanding Behavioral Antitrust

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Most frequently asked questions

1. What contributions have the authors mentioned in the paper "Understanding behavioral antitrust" ?

2. What can economists do to help them develop more effective antitrust rules?

3. Why do some managers act more procompetitively than standard models?

4. What is the role of the market participants in identifying their judgment and decision errors?

5. Why does a monopolist have to be irrationally aggressive in the face?

6. What is the role of the agency in predicting the likelihood of mergers?

7. What would have been the effect of the increase in the proportion of its sophisticated consumers?

8. Why do proponents of behavioral antitrust tend to overstate the anticompetitive harm?

9. Why should the agencies not assume that proffered merger efficiencies will materialize?

10. What is the argument that ambiguity is a factor in the selection of vertical contracting?

11. Why did the Supreme Court conclude that predatory pricing schemes are only rarely tried?

Citations

The Australian Competition and Consumer Commission Immunity Policy for Cartel Conduct: A Critical Legal Analysis

Two Contexts for Economics in Competition Law : Deterrence Effects and Competitive Effects

Effect of Behavioral Biases on Ranking of Financing Decisions by Financial Managers of Firms Listed In the Nairobi Securities Exchange

Nudges that should fail

Competition Law and the Bounded Rationality of Firms

References

Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias

Experimental Tests of the Endowment Effect and the Coase Theorem

The Endowment Effect, Loss Aversion, and Status Quo Bias

Relative income, happiness, and utility : an explanation for the Easterlin paradox and other puzzles

Barriers to New Competition: Their Character and Consequences in Manufacturing Industries

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