The antitrust prohibition of excessive pricing

Research output: Contribution to journalArticlepeer-review

Abstract

Excessive pricing by a dominant firm is unlawful in many countries. To assess whether it is excessive, the dominant firm's price is often compared with price benchmarks. We examine the competitive implications of two such benchmarks: a retrospective benchmark where the price that prevails after a rival enters the market is used to assess whether the dominant firm's pre-entry price was excessive, and a contemporaneous benchmark, where the dominant firm's price is compared with the price that the firm charges contemporaneously in another market. We show that the two benchmarks restrain the dominant firm's behavior when it acts as a monopoly, but soften competition when the dominant firm competes with a rival. Moreover, a retrospective benchmark promotes entry, but may lead to inefficient entry.

Original languageEnglish
Pages (from-to)503-541
Number of pages39
JournalInternational Journal of Industrial Organization
Volume61
DOIs
StatePublished - Nov 2018

Keywords

  • Antitrust
  • Contemporaneous benchmark
  • Dominant firm
  • Entry
  • Excessive pricing
  • Retrospective benchmark

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