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Buying Market Share: Agency Problem or Predatory Pricing?
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Christopher R Thomas
Published/Copyright:
May 9, 2006
Buying market share occurs when firms price below the profit-maximizing price in order to gain market share, even though recoupment of lost profit is impossible. Although perceived by rivals as predatory pricing, buying-market-share pricing does not generally damage competition even when it forces efficient rivals to exit, and current predatory pricing policy yields desirable antitrust enforcement outcomes. However, buying market share can harm competition when share-based entry barriers exist and product differentiation is sufficiently weak. With weak product differentiation and share-based entry barriers, even prices set above average costs can have anticompetitive consequences.
Published Online: 2006-5-9
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Buying Market Share: Agency Problem or Predatory Pricing?
- The Conspirator Dilemma: Introducing the "Trojan Horse" Enforcement Strategy
- The Optimal Magnitude and Probability of Fines with Court Congestion
- Economic Models and the Merger Guidelines: A Case Study
- Does Parallel Behavior Provide Some Evidence of Collusion?
- The Establishment of Constitutional Courts: A Study of 128 Democratic Constitutions
