Predatory Pricing: A Strategic and Welfare Analysis

Until recently predatory pricing 1 has been a relatively vague concept in antitrust law.This may be because emotive terms, such as predatory pricing, do not invite and sometimes defy analysis.But the lack of precision may also reflect a sense that the familiar tools of static economic analysis are ill-suited to cope with the issues posed by predatory pricing.As developed in this article, predatory pricing involves strategic behavior in which intertemporal considerations are central.Static economic models that fail to capture these attributes miss crucial features of the predatory pricing issue.Recently a remarkable degree of consensus in favor of cost-based rules has appeared in court opinions dealing with predatory pricing. 2 This judicial consensus may be a response to a series of articles addressed to predatory pricing issues, the most significant being com