Friday, June 11, 2010
Posted by D. Daniel Sokol
Gregory J. Werden, U.S. Department of Justice - Antitrust Division, Luke Froeb, Vanderbilt University - Owen Graduate School of Management, and Mikhael Shor, Vanderbilt University - Owen Graduate School of Management have an interesting new working paper on Behavioral Antitrust and Merger Control.
ABSTRACT: Scholarship on competition policy has begun to explore the implications of learning from psychology and to challenge the assumption of profit maximization, which is at the heart of neoclassical economic theory of the firm. This scholarship is briefly reviewed with a focus on merger control. Prospects for abandoning neoclassical economic theory, and basing merger control entirely on data from actual mergers or laboratory experiments, are explored. Also explored are implications of learning from psychology for merger assessment with nonstandard and irrational consumers. Conclusions from the forgoing are that psychology has few present implications for merger control and that relying less on neoclassical economic analysis would not be for the best.