Management Studies

Management Studies Offers Antitrust a More Sophisticated Picture of Firm Behavior

Neoclassical economics, which places the rational and well-informed actor maximizing utility at its foundation, underpins the dominant schools of thought on firm behavior in antitrust. Although neoclassical economics assumes that firms maximize profit, it has little to say on the actual decision-making processes within firms that drive firm conduct. In part, this is because neoclassical economists view the firm as a “black box,” whose decision-making behavior is too idiosyncratic or obscure to link to output and performance. At the same time, neoclassical assumptions about firm rationality and profit maximization mean that whatever these idiosyncratic behaviors of the individual firm may be, they are designed to maximize profit and returns to owners. Thus, firm decisions can be presumed to be rational.