Definitions and criteria of predatory pricing
By: David Spector
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 01-10; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 01-10.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2001
Place of publication: Cambridge, MA
Language: eng
Number of pages: 29
Description: This paper is an attempt to clarify the definition of predatory pricing, and to compare various legal criteria for the investigation of predation claims. By constructing a simple but full-fledge model, I show that (i) several definitions of what constitutes predatory pricing, often considered as equivalent, are in fact different; and (ii) the existing justifications for the use of price-cost comparisons (the Areeda-Turner test and its variants) are logically flawed. Other proposed rules, such as Williamson's output restriction rule or Baumol's "permanence of price reduction" rule are also problematic if courts hesitate between viewing a particular market as characterized by competition in prices or by competition in quantities. These remarks lend support to the use of two-tier procedures such as the one advocated by Joskow and Klevorick, and, more generally, lead us to view the rule of reason as superior to any per se rule. Keywords: predatory pricing, competition policy, exclusionary conduct.
Notes: Title from cover.

"January 2001."

Includes bibliographical references (p. 27-29).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.