The Necessary Complexity of Predatory Pricing Analysis

Abstract

While I agree with much of what Markovits writes about predatory pricing, I focus on two main areas of disagreement. First, tests for predatory pricing should reflect an optimal balance of deterrence of anticompetitive predation while minimizing the chilling of procompetitive price competition, whether or not this maximizes the accuracy of the tests. Second, while liability based on subjective beliefs (not intent) about predation generate optimal incentives if courts are perfect, an objective test might accomplish this better due to imperfect decision-making. I also expand on a point which Markovits makes with which I agree and is of fundamental importance. Quick screens for predatory pricing are only valuable if they are both substantially less costly than directly evaluating the deterrence/chilling balance and are not substantially worse at achieving this balance. Most tests for predatory pricing, such as the commonly used price-cost test, do not clearly satisfy these criteria.