ABSTRACT
The quests of regulatory authorities to protect consumers from exploitative pricing of firms can somewhat reflect the differences in the understanding of the meaning of costs to economists and lawyers. The focus of the legal approach is to ensure that pricing irregularities (in the sense of those deviating from the notion of competitive pricing under the model of perfect competition) do not result in predatory or discriminatory effects on the market. Consequently, legal approaches in general require that cost savings be demonstrated where a competing customer is treated differently from another, or that a firm accounts for the need to sell below its actual costs. The difficulty here, however, is that while predatory pricing, if found, is widely acknowledged between economists and lawyers as conferring no benefits to consumers, the welfare effect of price discrimination, on the other hand, has proven to be a difficult concept not only to delineate, but to identify.
