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The American Airlines Case: A Chance to Clarify Predation Policy

Aaron Edlin () and Joseph Farrell ()

Law and Economics from University Library of Munich, Germany

Abstract: Predation occurs when a firm offers consumers favorable deals, usually in the short run, that get rid of competition and thereby harm consumers in the long run. Modern economic theory has shown how commitment or collective-action problems among consumers can lead to such paradoxical effects. But the paradox does signal danger. Too hawkish a policy might ban favorable deals that are not predatory. It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high. Predation policy must therefore diagnose the unusual cases where favorable deals harm competition. To this end, courts and commentators have largely defined predation as sacrifice followed, at least plausibly, by recoupment at consumers' expense. The American Airlines case raises difficult questions about this approach.

JEL-codes: K2 L4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-law
Date: 2004-01-09
Note: 38 pages, Acrobat .pdf
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Citations: View citations in EconPapers (10) Track citations by RSS feed

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Working Paper: The American Airlines Case: A Chance to Clarify Predation Policy (2002) Downloads
Working Paper: The American Airlines Case: A Chance to Clarify Predation Policy (2002) Downloads
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