ABSTRACT
This chapter explores economic principles relevant to competition policy, explaining antitrust law's economic purpose and analysing a variety of business phenomena. Antitrust law prohibits monopolisation and anticompetitive agreements. Its economic function is to prevent inefficient conduct that would otherwise take place due to high transaction costs. Antitrust law protects the economy by prohibiting contracts and unilateral behaviour designed to suppress rivalry. The principal tool that antitrust policymakers use to scrutinise business strategies is economics. The chapter explores how competition rules have developed over time, and explains why policymakers sometimes disagree on the appropriate response to certain forms of business conduct. It also discusses the relevant schools of antitrust that have influenced competition policymaking in the last half century. A new school of antitrust thought, known as behavioural antitrust, adopts an inductive approach to problems in competition law. Instead, behavioural antitrust scholars look to cognitive biases that lead economic actors to make decisions contrary to those that expected-value theory predicts.
