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Games judges don't play: predatory pricing and strategic reasoning in US antitrust

  • Giocoli, Nicola

The paper analyzes the last three decades of debates on predatory pricing in US antitrust law, starting from the literature which followed Areeda & Turner 1975 and ending with the early years of the new century, after the Brooke decision. Special emphasis is given to the game-theoretic approach to predation and to the reasons why this approach has never gained attention in courtrooms. It is argued that, despite their mathematical rigor, the sophisticated stories told by strategic models in order to demonstrate the actual viability of predatory behavior fail to satisfy the criteria which guide the decisions of antitrust courts, in particular their preference for easy-to-apply rules. Therefore predation cases are still governed by a peculiar alliance between Chicago-style price theory – which, contrary to game theory, considers predatory behavior almost always irrational – and a Harvard-style attention for the operational side of antitrust enforcement.

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File URL: http://mpra.ub.uni-muenchen.de/33810/2/MPRA_paper_33810.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33810.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:33810
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  1. Paul Milgrom & John Roberts, 1980. "Predation, Reputation, and Entry Deterrence," Discussion Papers 427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Wilson, Robert, 1992. "Strategic models of entry deterrence," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 10, pages 305-329 Elsevier.
  3. repec:dgr:kubcen:199982 is not listed on IDEAS
  4. Elzinga, Kenneth G, 1970. "Predatory Pricing: The Case of the Gunpowder Trust," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 223-40, April.
  5. Yamey, B S, 1972. "Predatory Price Cutting: Notes and Comments," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 129-42, April.
  6. Giocoli, Nicola, 2005. "Mathematics as the role model for neoclassical economics (Blanqui Lecture)," MPRA Paper 33806, University Library of Munich, Germany.
  7. Drew Fudenberg & Jean Tirole, 1986. "A "Signal-Jamming" Theory of Predation," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 366-376, Autumn.
  8. William E. Kovacic & Carl Shapiro, 2003. "Antitrust Policy: A Century of Economic and Legal Thinking," Law and Economics 0303006, EconWPA.
  9. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  10. Demsetz, Harold, 1992. "How Many Cheers for Antitrust's 100 Years?," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 207-17, April.
  11. Cabral, Luis M B & Riordan, Michael H, 1997. "The Learning Curve, Predation, Antitrust, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 155-69, June.
  12. Franklin M. Fisher, 1989. "Games Economists Play: A Noncooperative View," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 113-124, Spring.
  13. Milgrom, Paul & Roberts, John, 1987. "Informational Asymmetries, Strategic Behavior, and Industrial Organization," American Economic Review, American Economic Association, vol. 77(2), pages 184-93, May.
  14. Peltzman, Sam, 1991. "The Handbook of Industrial Organization: Review Article," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 201-17, February.
  15. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  16. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  17. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  18. Easley, David & Masson, Robert T & Reynolds, Robert J, 1985. "Preying for Time," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 445-60, June.
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