ABSTRACT
This chapter attempts to formulate meaningful and workable tests for distinguishing between predatory and competitive pricing by examining the relationship between a firm's costs and its prices. Treatment of predatory pricing in the cases and the literature, however, has commonly suffered from two interrelated defects: failure to delineate clearly and correctly what practices should constitute the offense, and exaggerated fears that large firms will be inclined to engage in it. The chapter reviews some rudimentary economic distinctions among various measures of cost and their relevance to profit-maximization. It discusses which measurements of cost should be used to determine when a firm is engaging in predatory pricing. The chapter examines predatory devices other than general price reductions. The basic substantive issues raised by the Robinson-Patman Act's concern with primary-line injury to competition and by the Sherman Act's concern with predatory pricing are identical.
