Thursday, November 25, 2010
Posted by D. Daniel Sokol
Nicola Giocoli, University of Pisa - Department of Economics explores Games Judges Don't Play: Predatory Pricing and Strategic Reasoning in US Antitrust.
ABSTRACT: 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.