Behavioural Economics and Competition
London, England
25 January 2011
Hosted By: NERA Economic Consulting
Do consumers make rational decisions? Can the way in which choices are presented nudge our conduct and influence outcomes? Why are we so attracted to "free" offers? Why do so many bargaining games split the surplus 50:50?
In recent years regulators, executives, business advisers, and economic policy makers have shown increasing interest in behavioural economics and related areas. These new branches of economics, rooted at the intersection of economics and psychology, challenge traditional neo-classical microeconomics, and, often on the basis of experimental methods, call in question the assumption of "rational economic agent."
Popular discussion, influenced by the work of Thaler, Sunstein, Ariely, and others, has also focused on whether "choice architecture" can be used by governments to "nudge" people into making "better" lifestyle choices. Conversely, businesses are looking into ways to exploit failures of information or rationality to induce us to buy chocolate whilst standing in the checkout queue or borrow more than we mean to.
In this seminar, of interest to competition lawyers, in-house counsel, executives, corporate strategy advisers, and policy makers, NERA Director Dr. Mark Williams explained what behavioural economics is and how it differs from neo-classical thinking. He then discussed the practical relevance of behaviouralism in predictive economics (e.g., merger analysis or business strategy) and ex post explanatory economics (e.g., abuse-of-dominance cases or commercial litigation), as well as some implications for competition and competition policy analysis.
To obtain the presentation slides, please contact Mary Davies at mary.davies@nera.com or +44 20 7659 8804.
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