On the use of price-cost tests in loyalty discounts: Which implications from economic theory?

Massimo Motta () and Chiara Fumagalli

No 10550, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Recent cases in the US (Meritor, Eisai) and in the EU (Intel) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a price-cost test to predation but not to loyalty discounts. Still, the latter contain features (they reference rivals and allow to discriminate across buyers and/or units bought) that have a higher exclusionary potential than the former, and this may well warrant closer scrutiny and more severe treatment from antitrust agencies and courts.

Keywords: Exclusive dealing; Inefficient foreclosure; Market-share discounts (search for similar items in EconPapers)
JEL-codes: K21 L41 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-com, nep-hpe and nep-law
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Working Paper: On the Use of Price-cost Tests in Loyalty Discounts: Which Implications from Economic Theory? (2015)
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