Wednesday, June 19, 2019

Another Look at the Role of Barriers to Entry in Excessive Pricing Cases

John Davies and Jorge Padilla (both Compass Lexecon) offer Another Look at the Role of Barriers to Entry in Excessive Pricing Cases.

ABSTRACT: In this paper we explain that an important screen for the assessment of excessive pricing allegations is the existence of very high and persistent barriers to entry. When this condition is not met, there is no justification for the use of competition law to penalize a firm’s pricing decisions ex post. Most importantly, this is because the market will self-correct, but also because demonstrating to the required standard that prices are excessive is likely to be impossible. When barriers to entry are low, therefore, it becomes undesirable to prosecute excessive pricing. Prosecuting firms for setting prices that encourage entry might chill competition and harm consumers.

https://lawprofessors.typepad.com/antitrustprof_blog/2019/06/another-look-at-the-role-of-barriers-to-entry-in-excessive-pricing-cases.html

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