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Boundedly Rational Entrepreneurs and Antitrust

By  |  October 11, 2016

Posted by Social Science Research Network

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    Boundedly Rational Entrepreneurs and Antitrust

    Avishalom Tor (Notre Dame Law School)

    Abstract:      This chapter examines entrepreneurial activity and its implication for policy and antitrust law from a behavioral perspective. In particular, the analysis here focuses on the role of two sets of behavioral phenomena — overconfident beliefs and risk- seeking preferences — in facilitating boundedly rational entrepreneurship. Boundedly rational entrepreneurs may engage in entrepreneurial activity, such as the starting of new business ventures, under circumstances in which rational entrepreneurs would decline to do so. Consequently, overconfident or risk-seeking entrants compete with their more rational counterparts and create a postentry landscape that differs markedly from the picture assumed by traditional economic accounts of entrepreneurial activity. The behaviorally informed analysis of entry sheds new light on the dynamics of competition among entrepreneurs and on its implications for policy and antitrust law.