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Rule of reason versus mechanical tests in the adjudication of price predation

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Abstract

There is considerable controversy surrounding the legal standards used to detect and prosecute cases involving predatory pricing. This paper recommends the use of a two tiered standard in predatory pricing litigation. The first part of the test is designed to determine whether the market is structurally predisposed toward predation. The second part of the test examines the issue of predatory intent. Flexibility is built into these guidelines by giving the plaintiff an option in terms of the evidentiary burden it must carry. The administrative feasibility of this two tiered proposal is demonstrated in a case study analysis. The case analysis shows that the application of a mechanical price-cost predation rule would have incorrectly resulted in a guilty verdict.

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Authors and Affiliations

  1. Rider College, Lawrenceville, New Jersey

    Charles W. McCall (Associate Professor of Economics)

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  1. Charles W. McCall
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McCall, C.W. Rule of reason versus mechanical tests in the adjudication of price predation. Rev Ind Organ 3, 15–44 (1988). https://doi.org/10.1007/BF02229564

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  • DOI: https://doi.org/10.1007/BF02229564

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