Competitive injury from sales below total cost with predatory intent: the 'pinched' competitors

Article Abstract:

The average variable cost standard for predatory pricing antitrust violations underestimates the anticompetitive effect of pricing between average variable cost and average total cost and assumes that market power must be demonstrated though no statute requires such a showing. In 1967, the US Supreme Court in Utah Pie Co. v. Continental Baking Co. defined predatory pricing as pricing below average total cost with anticompetitive intent. Only the plaintiff, not the market, needed to be injured by the predatory practices. The practices engaged in, and not the market conditions, constituted a violation of antitrust laws.

Analysis, Cases, Frozen baked products, Price cutting

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Relationship between concentration and prices/profits: empirical studies and the 4-firm-40% market-power threshold

Article Abstract:

Study of the effect of increased market concentration on prices in local grocery store economic markets indicates that prices increase when the largest four firms in a market possess total market share in excess of 40%. Some economists have tried to explain the positive correlation between market share and profits based on economies of scale, but higher profits are clearly a result of exerting market power to raise prices. Prices and individual market share have also been shown to have a positive statistical relationship.

Research, Market share, Industrial concentration

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