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To: Andy Goett who wrote (91958)	11/9/1999 1:25:00 PM
From: Elmer	Respond to of 186894

Re: "If I recall correctly from my economics course, the definition of "predatory pricing" is when a firm sets price below average variable cost. I believe such pricing is illegal, and a competitor who suffers damages from a firm that practices predatory pricing can recover those damages in a civil action." So Intel should sue AMD? EP

To: Andy Goett who wrote (91958)	11/9/1999 2:48:00 PM
From: GVTucker	Respond to of 186894

Actually, the courts define 'predatory pricing' as selling a product below cost. It is left up to the judge and jury to define cost, usually in a way that best suits whatever public sentiment is at the time. Ironically, there is not a single shred of evidence that 'predatory pricing' has ever harmed consumers. Most probably, the myth of 'predatory pricing' is merely a flawed concept that is publicized by a poor competitor.

To: Andy Goett who wrote (91958)	11/11/1999 3:27:00 AM
From: nihil	Read Replies (1) \| Respond to of 186894

The problem is that almost everyone thinks in terms of predation when average costs are rising, while, in fact, the problem arises when average costs are falling. In the standard empirical case the LRAC curve is "L" shaped, as is the LRMC. In such a situation monopoly is the natural outcome, with the lowest MC company the sole survivor. In running the other rivals out of business, the monopolist to be may not legally undercut the rival's price even if his average or marginal cost is below the rival's price if his purpose is to destroy competition. The Supreme Court has pretty much abandoned the idea of predatory pricing. In the Japanese TV case it ruled that it would be irrational for the Japanese TV companies to conspire to undercut prices in the U.S. market in order to seize market share, thus kissing off the whole US TV industry.Check over y9our class notes and see if you got it down right.