Predatory Pricing: A Strategic and Welfare Analysis

Predatory Pricing: Rare Like a Unicorn?

Games judges don’t play: predatory pricing and strategic reasoning in US antitrust

The paper analyzes the last three decades of debates about predatory pricing in US antitrust law, starting from the literature that followed Areeda and Turner’s 1975 landmark paper and ending in the beginning of this century, upon the Brooke 1993 decision. Special emphasis is given to the game-theoretic approach to predation and to the reasons why this approach has never gained attention in the...

A strategic and welfare theoretic analysis of free trade areas

We construct a three-country model to determine how the formation of free trade areas (FTAs) affects optimal tariffs and welfare. We find that, at constant rest of the world (ROW) tariffs, the adoption of internal free trade induces union members to reduce their external tariffs below the Kemp–Wan [J. Int. Econom. 6 (1976) 95–97] level, and causes ROW’s terms of trade to improve and its welfare...

The Paradox of Predatory Pricing

Predatory pricing law attempts to keep prices low by harshly sanctioning prices that are anticompetitively low. The paradox of predatory pricing law is that even an analytically perfect specification of the line between predatory and innocent price cuts would result in deviations from optimal pricing because the very recognition of a predatory pricing offense will induce some firms to forgo inn...

Differential Pricing When Costs Differ: A Welfare Analysis∗

This paper analyzes the welfare effects of monopoly differential pricing in the important but largely neglected case where costs of service differ across consumer groups. Cost-based differential pricing is shown to increase total welfare and consumer welfare relative to uniform pricing for broad classes of demand functions, even though total output can still fall or the output allocation betwee...