Predatory accommodation: Below-cost pricing without exclusion in intermediate goods markets

Greg Shaffer, Leslie M. Marx

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

We show that below-cost pricing can arise in intermediate goods markets when a monopolist retailer negotiates sequentially with two suppliers of substitute products. Below-cost pricing by one supplier allows the retailer to extract rents from the second supplier. Thus, the retailer and one supplier can increase their joint profit at the expense of the second supplier. We consider the welfare implications of below-cost pricing (welfare can increase or decrease as a result of below-cost pricing) and provide suggestions for when the courts should view below-cost pricing in intermediate goods markets as anticompetitive and when they should not.
Original languageEnglish
Pages (from-to)22-43
Number of pages22
JournalRand Journal of Economics
Volume30
Issue number1
Publication statusPublished - 1999

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