Facts Over Theory: The Contribution of Behavioral Economics to Competition Law

By Andreas Heinemann

Traditionally, economic analysis is based on the homo economicus-hypothesis: Perfectly rational, strong-minded and self-interested persons and entities maximize their own utility or profit. By contrast, behavioral economics takes into account biases, inconsistent preferences, and altruism thus giving a more realistic view of decision-making. Competition law has always had an inclination to real behavior: If customers do not consider a certain product as a possible substitute, this product does not exert competitive pressure regardless of whether a rational buyer should view it as interchangeable. It is time to give the realistic approach a more general relevance in competition law.

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