Recoupment and Predatory Pricing Analysis

54 Pages Posted: 4 Dec 2018

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: November 9, 2018

Abstract

Recoupment inquiries play an increasingly important role in antitrust analysis, yet they raise a number of conundrums: How can a failure of recoupment due to the plausible long-run profit recovery being dwarfed by short-run losses be reconciled with a defense of no predation that presupposes no short-run sacrifice to begin with? How can recoupment inquiries be diagnostic with respect to competing explanations for defendants’ behavior — such as product promotion or “legal” predation — that likewise require recoupment? This article addresses these questions and others by grounding recoupment and predatory pricing analysis more broadly in a decision framework that focuses on classification (distinguishing illegal predation from other explanations for firms’ pricing) and on the magnitudes of the deterrence benefits and chilling costs of imposing liability. Regarding the latter, although concerns for the chilling of procompetitive activity sensibly drive predatory pricing analysis, the great variation in chilling costs across competing explanations for alleged predation is unrecognized. Much of the analysis here is not particular to recoupment; the investigation aims to inform future research, policy, and practice regarding many aspects of predatory pricing as well as other forms of anticompetitive conduct.

Keywords: Predatory Pricing, Recoupment, Antitrust, Competition Policy

JEL Classification: K21, L12, L41

Suggested Citation

Kaplow, Louis, Recoupment and Predatory Pricing Analysis (November 9, 2018). Journal of Legal Analysis (2018). Available at SSRN: https://ssrn.com/abstract=3281082

Louis Kaplow (Contact Author)

Harvard Law School ( email )

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National Bureau of Economic Research (NBER)

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