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86 Ind. L.J. 1527 (2011)
Behavioral Antitrust

handle is hein.journals/indana86 and id is 1549 raw text is: Behavioral Antitrustt AMANDA P. REEVES & MAURICE E. STUCKE t I. OVERVIEW OF BEHAVIORAL ECONOMICS .............................1532 A. WHAT Is BEHAVIORAL ECONOMICS?... ................................1532 B. SOME CRITICISMS AND SHORTCOMINGS OF BEHAVIORAL ECONOMICS, AND RESPONSES TO THOSE CRITICISMS ............... ................1538 II. THE PERSISTENCE OF RATIONAL CHOICE THEORY IN ANTITRUST LAW ..........1545 A. THE CHICAGO SCHOOL'S ASSUMPTION OF RATIONALITY......................1545 B. How THE RATIONALITY, PROFIT MAXIMIZATION, AND EFFICIENCY ASSUMPTIONS PERMEATE MODERN FEDERAL ANTITRUST LAW ................1549 III. How CAN BEHAVIORAL ECONOMICS INFORM ANTITRUST POLICIES? ...........1553 A. ASSUMPTION THAT RATIONAL PROFIT MAXIMIZERS WILL DEFEAT THE EXERCISE OF MARKET POWER IN MARKETS CHARACTERIZED BY LOW ENTRY BARRIERS...................................1554 B. ASSUMPTION THAT COMPANIES MERGE TO GENERATE SIGNIFICANT EFFICIENCIES ....................................... ........1560 C. ASSUMPTION THAT RATIONAL BIG BUYERS WILL THWART THE EXERCISE OF MARKET POWER ...........................1563 D. RELIANCE ON OPTIMAL DETERRENCE THEORY TO DETER CARTELS.....1567 IV. RECOMMENDATIONS RELATED TO THE PRACTICAL APPLICATION OF BEHAVIORAL ECONOMICS GOING FORWARD .............. .................1570 A. To BE APPLIED WELL, BEHAVIORAL ANTITRUST REQUIRES MORE EMPIRICAL WORK .....................................................1570 B. POSSIBILITIES FOR INCORPORATING BEHAVIORAL ECONOMICS INTO EXISTING ANTITRUST DOCTRINE ................. ....................1577 CONCLUSION............................................... ......1585 Fielding congressional questioning during the financial crisis, former Federal Reserve Chairman Alan Greenspan expressed his distress in discovering a flaw in his free-market beliefs: Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief.' The financial crisis has also prompted the jurist and famous t Copyright 0 2011 Amanda P. Reeves & Maurice E. Stucke. * Attorney Advisor to Commissioner J. Thomas Rosch, Federal Trade Commission. The views stated here are those of the authors and do not necessarily reflect the views of the Commission or any Commissioner. ** Associate Professor, University of Tennessee College of Law; Senior Fellow, American Antitrust Institute. : The authors would like to thank Scott Baker, Caron Beaton-Wells, Peter Carstensen, Kenneth M. Davidson, Stefano DellaVigna, Susan DeSanti, Warren Grimes, Christopher Leslie, Stephen Martin, J. Thomas Rosch, D. Daniel Sokol, Gregory M. Stein, Andreas Stephan, Darren S. Tucker, and Spencer Weber Waller for their helpful comments. 1. Kara Scannell & Sudeep Reddy, Greenspan Admits Errors to Hostile House Panel, WALL ST. J., Oct. 24, 2008, at Al, available at http://online.wsj.com/article/SB1224765 45437862295.html.

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