IDEAS home Printed from https://ideas.repec.org/p/cvs/starer/94-14.html
   My bibliography  Save this paper

Predation and the Logic of the Average Variable Cost Test

Author

Listed:
  • Baumol, William J.

Abstract

This article explores principles for execution of the widely accepted Areeda-Turner test of predatory pricing. Defining an Areeda-Turner price as one that does not threaten to exclude any more-efficient supplier, I conclude that (1) any individual price that is not below average avoidable cost cannot be predatory; (2) thus, average avoidable cost, not marginal cost, is crucial in testing predation; (3) sets of prices of different products of the firm can violate the test if the revenues of any combinations of the firm's products fall short of the combined avoidable costs of those products; and (4) a firm's failure to maximize its profits during some relatively brief period is not by itself legitimate evidence of predation. Copyright 1996 by the University of Chicago.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Baumol, William J., 1994. "Predation and the Logic of the Average Variable Cost Test," Working Papers 94-14, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:94-14
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. J. Gregory Sidak & William Baumol, 1994. "Toward Competition in Local Telephony," Books, American Enterprise Institute, number 52984.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Török, Ádám, 2011. "A dominanciaproblémák tényeinek értelmezése és a közgazdaság-tudományi módszertan
      [Interpretation of the facts of dominance problems and the methodology of economics]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 41-55.
    2. Budzinski Oliver & Köhler Karoline Henrike, 2015. "Is Amazon The Next Google?," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 66(1), pages 263-288, January.
    3. Valentiny, Pál, 2004. "Árprés és felfaló árazás. Közgazdasági elmélet, bírói, szabályozói gyakorlat
      [Price squeezing and predatory pricing. Economic theory and judicial and regulatory practice]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 24-45.
    4. Colombo, Stefano, 2009. "On the effects of selective below-cost pricing in a vertical differentiation model," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-13.
    5. Hern, R., 2001. "Competition and access pricing in the UK water industry," Utilities Policy, Elsevier, vol. 10(3-4), pages 117-127.
    6. Edlin, Aaron S. & Farrell, Joseph, 2002. "The American Airlines Case: A Chance to Clarify Predation Policy," Competition Policy Center, Working Paper Series qt32h8b40m, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    7. Kai Hüschelrath & Jürgen Weigand, 2013. "Predation enforcement options: an evaluation in a Cournot framework," European Journal of Law and Economics, Springer, vol. 35(2), pages 241-272, April.
    8. Morrison, William G., 2004. "Dimensions of predatory pricing in air travel markets," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 87-95.
    9. Herbert Hovenkamp, 2015. "The Areeda–Turner Test for Exclusionary Pricing: A Critical Journal," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 209-228, May.
    10. Michael Katz, 2002. "Recent Antitrust Enforcement Actions by the U.S. Department of Justice: A Selective Survey of Economic Issues," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(4), pages 373-397, December.
    11. Christian Genthon, 2007. "Can we measure Microsoft's market power ?," Post-Print halshs-00153837, HAL.
    12. Lindsey, Robin & West, Douglas S., 2003. "Predatory pricing in differentiated products retail markets," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 551-592, April.
    13. Mark L. Burton & David L. Kaserman & John W. Mayo, 2009. "Common Costs And Cross-Subsidies: Misestimation Versus Misallocation," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 193-199, April.
    14. Sveinn Vidar Gudmundsson, 2011. "Liberalization of Air Transport," Chapters,in: International Handbook of Network Industries, chapter 14 Edward Elgar Publishing.
    15. Török, Ádám, 2009. "Társadalomtudományi tények és természettudományos módszerek
      [Social scientific facts and natural scientific techniques]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1067-1087.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cvs:starer:94-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Stubing). General contact details of provider: http://edirc.repec.org/data/aenyuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.