The authors advance the understanding of predatory pricing through an examination of the Supreme Court's elements for proving allegations of such conduct in the marketplace. On the basis of recent research in economics, marketing, and other fields and a 2001 U.S. Department of Transportation report, the authors offer several insights into understanding and applying these elements in the airline industry. Drawing on these insights, the authors conduct empirical research to examine patterns of market power on the part of major airlines in selected hub airports and the pricing response to the entry of discount airlines over time on the part of a major airline. They also examine the relationship between market power and pricing-related conduct through a simultaneous equation model. Findings from these analyses yield insights into understanding aggressive and predatory pricing in the airline industry.
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