Predatory prices. Pricing designed to annihilate competitors
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The article presents predatory pricing as anti-competitive behaviour. It describes theories of pricing below cost, from the inception of the concept to the present day, that are decisive to economic assessment of it. The Chicago School questions the rationalism of predatory pricing; Areeda and Turner approached the problem on the basis of short-term average changing costs, but others analysed the long-term effects of predatory pricing. A game-theory approach placed predatory pricing in another light, as entirely rational behaviour under certain conditions, while recent and present-day theories have used newer methods to present predatory pricing. The article also mentions the circumstances that can legitimize this otherwise damaging behaviour. Since selling at under cost is the subject of debate today, it is important to analyse when it poses a danger to welfare, according to the theories.
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