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2 Rev. L & Econ. 1 (2006)

handle is hein.journals/rvleco2 and id is 1 raw text is: Buying Market Share: Agency Problem or Predatory Pricing? CHRISTOPHER R. THOMAS, BRAD P. KAMP Department ofEconomics, University ofSouth Florida Buying market share occurs when firms price below the profit-maximiging price in order to gain market share, even though recoupment of lost profit is impossible. Although perceived ly rivals as predatoU pricing bujing-market-share priding does not generalyl damage competition even when it forces effident rivals to exit, and current predato pricing poldyjields desirable antitrust enforcement outcomes. However, buing market share can harm competition when share-based entU bariers exist and product dferentiation is suffidenty weak. With weak product differentiation and share-based entry barriers, even prices set above average costs can have anticompetitive consequences. If you are hunting for a predator and mistakenly shoot a competitoryou injure consumers. Kenneth Elginga and Daid Millst 1. INTRODUCTION Despite widespread recognition that many firms experience serious agency problems, pricing behavior by managers who do not seek to maximize profit has received only minor and scattered attention by antitrust policymakers. Episodes of ineffective corporate governance appear to be sufficiently common to warrant inclusion in antitrust analysis.' Antitrust policy benefits * The authors appreciate valuable comments from Philip Porter, Scott Stephens, and an anonymous referee, but retain responsibility for remaining errors. The authors thank the USF Division of Sponsored Research for financial support. t Elzinga and Mills (2001:3). 1 In a recent review of the modern significance of Brandeis's and Holmes's views on business, Posner (2005) refers to the current crisis of corporate governance and observes that most experts in corporate governance and corporate finance, including economists and regulators as well as lawyers, underestimated the amount of corporate misfeasance and the size of agency

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