Tuesday, August 17, 2010
Posted by D. Daniel Sokol
Maurice E. Stucke, University of Tennessee College of Law suggests Reconsidering Competition and the Goals of Competition Law.
ABSTRACT: In light of the financial crisis and the empirical findings from behavioral economics, policymakers should reconsider two fundamental questions: First, what is competition? Second, what are the goals of the competition laws? One cannot answer the second question, without addressing the first. Only in understanding competition can one understand what competition can or cannot achieve under certain circumstances.
This Article reexamines one premise of competition, namely the extent to which firms and consumers are rational and act with perfect willpower. In varying this assumption, Part I maps four scenarios of competition. Given these different conceptions of competition, this Article addresses why a single well-defined objective for competition law is unrealistic and proposes how to account for competition policy's multiple objectives into the legal framework.
Competition authorities should revisit their conception of competition, including the underlying assumptions, to better understand the competitive dynamics in different industries. In engaging in this review, competition authorities should consider the developments in several inter-disciplinary fields, such as behavioral economics, new institutional economics, and evolutionary economics. The literature can provide competition authorities a richer understanding of observed behavior in the marketplace, how consumers choose, and additional remedial options, such as default options. Ultimately, these interdisciplinary economic theories can improve antitrust analysis by helping us understand first what competition is, second what competition can achieve for us, and finally how competition can promote the good life.