Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 12, 2009 erstellt
Description:
An important action that is illegal according to competition law, both in the US and Europe, is predatory pricing. In this paper we develop a model that allows an entrant to sue an incumbent for predatory pricing. The cost of production is essential for judgments in such cases, and we allow the court to make errors. The imperfect enforcement by courts, affects both the incentives to sue and competition between the entrant and the incumbent. For sufficiently high damages, the predatory pricing law is shown to stifle current competition. Sufficiently low damages may stimulate current competition, but at the expense of weaker future competition. Imperfect enforceability causes distortion in the incumbent's prices, even if a predatory pricing strategy is not adopted. Therefore, the cost of adopting predatory pricing - in terms of 1.period profit loss - is reduced as a consequence of the predatory pricing law