A Framework for Analyzing Predatory Pricing Policy

Abstract

Recent literature on the law and economics of antitrust has devoted increasing attention to the issue of "predatory pricing"-a dominant firm's use of price to restrict competition by driving out existing rivals or excluding potential ones. A number of scholars-including Areeda and Turner, Baumol, Bork, Posner, Scherer, and Williamson- have contributed to this discussion, and each has taken a different approach to the predatory pricing problem. A variety of different "rules" have been suggested, and these suggestions have played key roles in the decision of recent Sherman Act and Federal Trade Commission Act cases. Although each author discusses the approaches of writers who have preceded him and although the opinions in the cases have compared the various approaches, no unified structure has been provided for evaluating the alternative approaches and choosing among them.

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