ABSTRACT
In this chapter, the author argues the merits of a proposed rule, referred to as the Capacity Lock-in Rule (CLR), for deterring predatory behaviour in the airline industry. The Rule itself limits conduct in an ex-ante context by focusing on the response of incumbents after entrants have withdrawn from the market. The chapter summarizes the events leading up to the formulation of the proposal, followed by a summary of its salient characteristics. There was a lengthy exchange of correspondence between Professor Alfred Kahn and the author about the proposal and because this exchange clarified a number of issues and tested the arguments, it is also included. The author re-visits his original proposal in the light of the various points made by Professor Kahn and with the benefit of having reflected further on the issue. Professor Alfred Kahn is well known for his abiding interest in antitrust matters and he testified before hearings relating to the Department of Transportation's proposals.
