ABSTRACT
This chapter reviews some of the economic and policy issues behind Article 82 decisions in the area of dominant firm pricing abuse. One of the seminal articles on price discrimination is Schmalensee's 1981 analysis of the welfare differences between single pricing and price discrimination for a profit-maximising monopoly supplier selling its product in two markets. The desirability of marginal cost pricing is a central theme of welfare economics—the branch of economic theory that seeks to explain why and under what conditions markets can create conditions that maximise consumer welfare. One of the biggest practical problems is how to implement marginal cost pricing principles in firms whose business encounters the problem of fixed cost recovery. Perhaps the simplest form of rebate scheme is a system of standard volume rebates, for example offering a 10 per cent discount to all customers whose purchases exceed a certain threshold level.
