Behavioral Economics and US Antitrust Policy

19 July 2015
By. Dr. Elizabeth M. Bailey

Modern day antitrust policy is grounded firmly in neoclassical economics. It is important, however, to test whether the modelling assumptions accord with the facts. It is also important to assess whether behavior that deviates from the conventional assumptions is systematic and persistent. If the relevant facts suggest that consumers or firms might behave in ways that depart from conventional assumptions, then private parties, government agencies, and the courts should consider alternate economic models that account appropriately for the observed behavior.

In this article published in Review of Industrial Organization, NERA Affiliated Academic Dr. Elizabeth Bailey discusses the role for behavioral economics in antitrust policy and ways that it may augment the evaluation of potentially anticompetitive behavior. Actual antitrust cases are also discussed that have employed insights from behavioral economics.