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Rummaging through the Bottom of Pandora’s Box: Funding Predatory Pricing through Contemporaneous Recoupment

Shaun D. Ledgerwood, Wesley J. Heath. "Rummaging through the Bottom of Pandora’s Box: Funding Predatory Pricing through Contemporaneous Recoupment." Universtity of Virginia School of Law: Wirginia Law & Business Review 6.3 (2012): 509-568.

This paper critiques the two-phase recoupment model of predatory pricing as applied to multi-product sellers. To avoid summary judgment, plaintiffs must prove the predator (1) lost money by selling items at prices below cost, and (2) later recouped these losses by charging high prices enabled by market power gained from the predation. We show that for multiproduct sellers, recoupment can occur contemporaneously by greater foot traffic driving increased sales of other items sold at competitive prices. Unlike pro-competitive loss leading, the multiproduct predator intentionally focuses its losses into the rival’s product set, expanding the breadth thereof until the rival’s products are sold as a group below cost. By increased foot traffic, the predator then contemporaneously recoups some or all of these losses, reducing or eliminating the need for later recoupment through supracompetitive pricing. We show that a predation can therefore succeed in the absence of traditional market power.

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