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Bradley P. Kamp

In: 21st Century Economics: A Reference Handbook

Chapter 13: Predatory Pricing and Strategic Entry Barriers

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Predatory Pricing and Strategic Entry Barriers
Predatory pricing and strategic entry barriers

The classic definition of predatory pricing is pricing below cost with the intention of running a competitor out of business. In more general terms, predatory pricing is a price reduction that is only profitable because of added market power the predator gains from eliminating, disciplining, or otherwise inhibiting the competitive conduct of a rival or potential rival (Bolton, Brodley, & Riordan, 2000). Claims of large companies preying on their smaller competitors are commonplace, starting during the formation of trusts during the late nineteenth century up through charges against Wal-Mart today. Yet in the two most recent, precedent-setting predatory pricing cases, the Supreme Court observed that “there is a consensus among commentators that predatory pricing ...

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