New Economics Papers
on Law and Economics
Issue of 2009‒11‒27
two papers chosen by
Jeong-Joon Lee, Towson University

  1. A Simple Theory of Predation By Fumagalli, Chiara; Motta, Massimo
  2. How to Measure the Deterrence Effects of Merger Policy: Frequency or Composition? By Barros, Pedro Luis Pita; Clougherty, Joseph A.; Seldeslachts, Jo

  1. By: Fumagalli, Chiara; Motta, Massimo
    Abstract: We propose a simple theory of predatory pricing, based on scale economies and sequential buyers (or markets). The entrant (or prey) needs to reach a critical scale to be successful. The incumbent (or predator) is ready to make losses on earlier buyers so as to deprive the prey of the scale it needs, thus making monopoly profits on later buyers. Several extensions are considered, including markets where scale economies exist because of demand externalities or two-sided market effects, and where markets are characterised by common costs. Conditions under which predation may take place in actual cases are also discussed.
    Keywords: Anticompetitive behaviour; Antitrust; Below-cost pricing; Exclusion
    JEL: K21 L12 L40
    Date: 2009–07
  2. By: Barros, Pedro Luis Pita; Clougherty, Joseph A.; Seldeslachts, Jo
    Abstract: We show that the number of merger proposals (frequency-based deterrence) is a more appropriate indicator of underlying changes in merger policy than the relative anti-competitiveness of merger proposals (composition-based deterrence). This has strong implications for the empirical analysis of the deterrence effects of merger policy enforcement, and potential implications regarding how to reduce anti-competitive merger proposals.
    Keywords: antitrust; deterrence; merger policy
    JEL: K21 L40 L49
    Date: 2009–09

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