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Are Predatory Commitments Credible?: Who Should the Courts Believe? [Hardcover]

John R. Jr Lott
4.9 out of 5 stars  See all reviews (7 customer reviews)

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Book Description

July 1, 1999 0226493555 978-0226493558 1
Predatory pricing has long been a contentious issue among lawmakers and economists. Legal actions are continually brought against companies. But the question remains: how likely are firms to cut prices in order to drive rivals out of business? Predatory firms risk having to keep prices below cost for such an extended period that it would become cost-prohibitive. Recently, economists have turned to game theory to examine circumstances under which predatory tactics could be profitable.

John R. Lott, Jr. provides long-awaited empirical analysis in this book. By examining firms accused of or convicted of predation over a thirty-year period of time, he shows that these firms are not organized as the game-theoretic or other models of predation would predict. In contrast, what evidence exists for predation suggests that government enterprises are more of a threat.

Lott presents crucial new data and analysis, attacking an issue of major legal and economic importance. This impressive work will be of great interest to economists, legal scholars, and antitrust policy makers.

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Editorial Reviews

Review Are Predatory Commitments Credible?, John R. Lott Jr. masterfully picks apart the game theorists' argument. -- The Wall Street Journal, David R. Henderson

Product Details

  • Series: Studies in Law and Economics
  • Hardcover: 176 pages
  • Publisher: University Of Chicago Press; 1 edition (July 1, 1999)
  • Language: English
  • ISBN-10: 0226493555
  • ISBN-13: 978-0226493558
  • Product Dimensions: 9.4 x 6.3 x 0.8 inches
  • Shipping Weight: 15.8 ounces (View shipping rates and policies)
  • Average Customer Review: 4.9 out of 5 stars  See all reviews (7 customer reviews)
  • Amazon Best Sellers Rank: #1,403,427 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews
13 of 13 people found the following review helpful
5.0 out of 5 stars Provides Much-Needed Empirical Study of Predation Theories September 26, 1999
Despite the large number of lawsuits and bureaucratic actions taken against firms alleged to be "predatory pricers," there has been surprisingly -- no, shockingly -- little empirical analysis of predatory-pricing theories. John Lott's book offers what is far and away the most extensive and intensive empirical analysis of the new wave of game-theoretic predation theories that first emerged in the early 1980s. Lott uses ingenious empirical tests (guided by carefully reasoned economics) to see if these new theories hold water. He finds that they don't.
This book is a must-read for anyone who wishes today to comment upon the law or economics of predation.
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11 of 11 people found the following review helpful
5.0 out of 5 stars Terrific book June 19, 2000
Format:Hardcover|Verified Purchase
If you like logical discussions that lead to insights you had not anticipated, this is a book you will enjoy. One such insight is that the predatory commitments of government agencies are likely to be more credible than the predatory commitments of private firms. Lott's book is one of those infrequently found books that requires that you sip a glass of wine as you read one chapter each night, and enjoy taking both the book and wine slowly. Very highly recommended.
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11 of 11 people found the following review helpful
By A Customer
If you want to understand the government's charges against American Airlines or Microsoft, this book lets you know where they are coming from and why their cases make so little sense. I saw Lott recently on CSPAN discussing this book and it lived up to its billing. As the Chicago Professor says in a dust cover blurb, Lott demolishes any evidence that predatory pricing is an important phenomenon. This book is worthwhile reading even if you only want to learn how to set up and present empirical evidence in a clear convincing manner. I was particularly impressed by how he took the time to clearly describe the arguments on both sides of the debate.
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6 of 6 people found the following review helpful
5.0 out of 5 stars by Eric A. Helland February 26, 2001
In the 1960s and 1970s, the conventional wisdom in the economics of industrial organization was that monopoly power was pervasive and that a strong antitrust policy was needed to combat such power. A small band of economists and lawyers associated with the University of Chicago attacked the conventional wisdom, knocking out the theoretical underpinnings of antitrust law in general and the theory of predatory pricing in particular. The Chicago School analysts showed that, in theory, predatory pricing was unlikely to work because it required the predator to lower prices on an increased quantity of product, thereby taking large losses in the short run. Moreover, even if the competitor were driven out of business, the higher long-run price needed to recoup the short-run loss would encourage entry, and in the final accounting the predation would prove unprofitable. Empirical analysis backed up the Chicago School theory. Indeed, economists could not adduce a single clear-cut case of actual predatory pricing-hence, the title of the survey article by Roland H. Koller II, "The Myth of Predatory Pricing" (Antitrust Law and Economics Review 4 [summer 1971]: 105-23).
As the Chicago School ideas triumphed in Washington, they came under attack in the academy. One source of attack was the new industrial organization (NIO), based on game theory, which was revolutionizing all areas of economics. More recently, the analysis of "path dependence" has formed a second prong of attack. The game theorists created a host of models showing that with certain assumptions about information, strategy, and the structure of the game, a threat to use predatory pricing could, in theory, be profitable.
John Lott's book Are Predatory Commitments Credible? Who Should the Courts Believe?
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