Predatory pricing

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...

Predatory Pricing: Rare Like a Unicorn?

Predatory pricing under uncertainty: revisiting the deep pocket argument

In this paper we develop a stochastic dynamic model of predatory pricing. When profits evolve stochastically, a negative demand shock can lead to bankruptcy for firms, which cannot immediately raise external capital. An assumption that firms are able to hoard liquidity creates incentives for market incumbents to use the predatory pricing strategies in order to keep the new players out of the in...

Predatory Pricing - Collusion Between Insurers and Drug Companies

Collusion between insurers and drug companies Insurance companies and drug manufacturers can give consumers a headache when they join together. They may also be violating the law. The recently-proposed federal health care plans spark fear and apprehension in most areas of the health care industry. Many physicians, hospitals, and corporations are scrambling to predict the path of legislation and...

Pounding Square Pegs into round Holes: Another Look at the Neoclassical Theory of Predatory Pricing

For more than forty years, economists have routinely rejected the postulate that economic theory should be realistic. Ever since Milton Friedman sketchily outlined a positive methodology for economics, most students of our science have come to endorse Friedman’s view and have claimed that the only quality standard of economic reasoning was its predictive power. Good theories yield fairly correc...