The Antitrust Prohibition of Excessive Pricing

46 Pages Posted: 18 Apr 2019

See all articles by David Gilo

David Gilo

Tel Aviv University - Buchmann Faculty of Law

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Date Written: March 19, 2019

Abstract

Excessive pricing by a dominant firm is unlawful in many countries. To assess whether it is excessive, the dominant firm’s price is often compared with price benchmarks. We examine the competitive implications of two such benchmarks: a retrospective benchmark where the price that prevails after a rival enters the market is used to assess whether the dominant firm’s pre-entry price was excessive, and a contemporaneous benchmark, where the dominant firm’s price is compared with the price that the firm charges contemporaneously in another market. We show that the two benchmarks restrain the dominant firm’s behavior when it acts as a monopoly, but soften competition when the dominant firm competes with a rival. Moreover, a retrospective benchmark promotes entry, but may lead to inefficient entry.

Suggested Citation

Gilo, David and Spiegel, Yossi, The Antitrust Prohibition of Excessive Pricing (March 19, 2019). Available at SSRN: https://ssrn.com/abstract=3342766 or http://dx.doi.org/10.2139/ssrn.3342766

David Gilo (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6406299 (Phone)

Yossi Spiegel

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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