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Economic Rationality and the Areeda–Turner Rule

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  • William Comanor
  • H. Frech

Abstract

The Areeda–Turner rule in U.S. antitrust jurisprudence limits successful predatory pricing cases to circumstances where prices can be shown to have been set below marginal costs. While not cast so, the rule reflects the view that predatory pricing is rarely attempted; and even where attempted is rarely successful; and even where attempted and successful, is difficult to identify. In this paper, we examine the theoretical and empirical foundations of this rule, and conclude that it is time to demote the Areeda–Turner analysis from the status of a rule to that of a potentially useful form of inquiry in predatory pricing litigation, but one which is neither necessary nor dispositive. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • William Comanor & H. Frech, 2015. "Economic Rationality and the Areeda–Turner Rule," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 253-268, May.
    • Handle: RePEc:kap:revind:v:46:y:2015:i:3:p:253-268
    DOI: 10.1007/s11151-015-9457-0
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    Cited by:

    1. Stephen Martin, 2015. "Areeda–Turner and the Treatment of Exclusionary Pricing under U.S. Antitrust and EU Competition Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 229-252, May.
    2. Valentiny, Pál, 2019. "Közgazdaságtan a jogalkalmazásban [Forensic economics]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 134-162.

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    More about this item

    Keywords

    Predatory pricing; Antitrust; Monopolization; Areeda–Turner rule; Credibility; Subgame perfection; Rationality; Chain-Store Paradox; K21; L41; L12; D43;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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