87 Yale L.J. 1353 (1977-1978)
A Preliminary Response

handle is hein.journals/ylr87 and id is 1375 raw text is: A Preliminary Response*

Oliver E. Williamsont
I welcome this comment by Professors Areeda and Turner. Although
I disagree with most of it-partly for reasons of accuracy, partly for
analytical reasons, and partly on grounds of operationality-I am
pleased to see the issues aired.
The accuracy issues to which I object involve misstatements of my
views and misleading choice of language. My main analytical objection
is that static, nonstrategic, competitive arguments are applied un-
critically to a situation where intertemporal, strategic, monopolistic
factors are central. Efficiency claims on behalf of marginal-cost pricing
that arguably go through in the former case simply fail to carry over
to the latter. Unfortunately, moreover, the succession of efficiency
errors that beset the Areeda-Turner analysis of predatory pricing is
not offsetting. Notwithstanding intentions to use economic analysis
dispassionately, the interests of defendants rather than of society are
served by the mistaken rules that Areeda and Turner produce. Al-
though the operationality issues that they discuss are real, I am not
persuaded that the problems with the output rule are as onerous as
they project, and I submit that difficulties with their price-to-cost test
are understated.
It is thus doubtful that a tradeoff needs to be faced between better
analysis and administrability. The possibility that the analytical su-
periority of my treatment of predatory pricing is more than offset by
(comparative) difficulties of administration nevertheless warrants
scrutiny. Until I have an opportunity to address these issues more fully,
readers are cautioned that Areeda and Turner's analytical errors are
not remedied by repetition and that Areeda and Turner have yet to
confront predatory pricing from the standpoint of fairness. Given their
silence on the latter issue, one can only conjecture that their failure to
address the fairness aspects of predatory pricing is due to oversight,
reflects a judgment that fairness is unimportant, or discloses an aware-
ness that their cost-based rules are grievously flawed with respect to
* The comment by Professors Arccda and Turner arrived too late in the publication
cycle to enable Professor Williamson to prepare a full response. This preliminary response
identifies some of the major points of disagreement. A more complete analysis by Professor
Williamson is in preparation. Professor Williamson invites those interested in receiving a
prepublication copy of his response to send him a written request.
t Professor of Economics, Law, and Public Policy, University of Pennsylvania.


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