The Antitrust Revolution: Economics, Competition, and Policy

By John E. Kwoka Jr.; Lawrence J. White | Go to book overview

CASE 20
The American Airlines Case:
A Chance to Clarify Predation Policy (2001)

Aaron S. Edlin and Joseph Farrell


INTRODUCTION

Predation occurs when a firm offers consumers favorable deals, usually in the short run, that get rid of competition and thereby harm consumers in the long run. Modern economic theory has shown how commitment or collective-action problems among consumers can lead to such paradoxical

effects.1

But the paradox does signal danger. Too hawkish a policy might ban favorable deals that are not predatory. “It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high.”2 Predation policy must therefore diagnose the unusual cases where favorable deals harm competition.

Farrell thanks SIEPR for research support through a Cain Fellowship, and Edlin thanks the Alfred
P. Sloan foundation for a faculty fellowship. Farrell was Deputy Assistant Attorney General at the
Department of Justice in 2000 to 2001. Edlin was senior adviser covering antitrust on the Presi-
dent's Council of Economic Advisers during 1997–1998 and commented on drafts of Department
of Transportation (1998). The views here are our own and not those of our former employers; nor
can they be attributed to helpful colleagues, who included Severin Borenstein, Craig Conrath, Carl
Shapiro, and Gregory Werden. This paper is based solely on public information. We thank Charles
Clarke for helpful editing.

1See Edlin (2002), Bolton, Brodley, and Riordan (2000), and Spector (2001). The relevance of
these problems is illustrated in Barry Wright, where the collective action problem is limited be-
cause there is one large purchaser, Grinnell. Grinnell can presumably choose whether to take fa-
vorable deals (even if temporary) or whether to subsidize competition (Barry Wright) for the sake
of long-term low prices. Even here, though, too little entry can occur if the buyer cannot commit
not to “take the bait” of post-entry discounts.

2Brooke Group, pp. 226–227, cited in American Airlines'Appellees' Brief at 15.

-502-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
The Antitrust Revolution: Economics, Competition, and Policy
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 527

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.