Chapter 13: Predatory Pricing and Strategic Entry Barriers

Bradley P. Kamp

Predatory pricing and strategic entry barriers The classic definition of predatory pricing is pricing below cost with the intention of running a competitor out of business. In more general terms, predatory pricing is a price reduction that is only profitable because of added market power the predator gains from eliminating, disciplining, or otherwise inhibiting the competitive conduct of a rival or potential rival (Bolton, Brodley, & Riordan, 2000). Claims of large companies preying on their smaller competitors are commonplace, starting during the formation of trusts during the late nineteenth century up through charges against Wal-Mart today. Yet in the two most recent, precedent-setting predatory pricing cases, the Supreme Court observed that “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful” ( Matsushita Electric Industrial Co. v. Zenith Radio Corp ., 1986), and “predatory pricing schemes are implausible … and even more ...

Users without subscription are not able to see the full content on this title. Please, subscribe or login to access all content on this website.

• Buy The Book