Behavioural Economics

The Limits of Behavioural Antitrust

By Peter O’Loughlin (University of Oxford)

Behavioural economics’ successful penetration of antitrust enforcement apparently resides in its ability to predict market outcomes. This theoretical hurdle, however, rests on an implicit assumption of antitrust as a “predictive enterprise” and therefore raises descriptive and normative questions. Nevertheless, the extent to which antitrust is and should be a predictive enterprise has been omitted from the Behavioural Antitrust debate to date. This Essay seeks to remedy this shortcoming by evaluating antitrust analysis’ predictive nature from these descriptive and normative standpoints. Assuming predictive analysis does and should have some role to play in antitrust, the Essay subsequently assesses behavioural economics as a predictive tool vis-à-vis rational choice theory. It is concluded that neither can predict perfectly; rather, boundary conditions would need to be known ex-ante for predicting consumer irrational decision-making. In this important respect, the Essay thus identifies the limits of behavioural economics for the purposes of antitrust analysis.

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