Overcoming The Efficiency Paradox: Consumer Welfare as Fairness in a Stag Hunt Setting  

Fabrizio Esposito (Nova University, Lisbon)
Pessina Gianmaria (University of Torino)

Abstract

This article deals with the on-going conflict between the total welfare standard in the economic analysis of law and the legal scholars’ expectation of fairness-based discourse. It offers a micro-founded account of market allocations based on consumer welfare maximization, rather than total welfare maximization. More precisely, the consumer welfare standard is a focal point that self-interested, rational agents would choose to coordinate their behaviour across several markets.
This hypothesis meshes well with evidence collected across several disciplines. First, empirical evidence shows that there is an intimate interaction between fairness norms and economic exchange. Accordingly, the lasting opposition between allocative efficiency and fairness is an academic paradox, detached from social reality. Second, the consumer welfare standard has a remarkable pedigree in economics. This fact shows that it is a little effort for the economic analysis of law to adopt this standard. Third, the consumer welfare standard has a superior explanatory power of the content of EU antitrust and consumer law. This fact shows that the consumer welfare standard has been selected as a social coordination device.
We design a digital experimental setting to test whether a group can develop the consumer welfare standard as a signalling mechanism to solve their coordination problem. The coordination problem is: every self-interested rational agent prefers to be a monopolist producer and a competitive consumer. The experimental setting is a two-stage variation of the stag hunt game. The successful result will be finding that the preference for competition as a consumer leads to the development of a consumerist fairness norm countering monopolistic self-interest.