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10 J. Legal Analysis 1 (2018)

handle is hein.journals/jlegan10 and id is 1 raw text is: 






RECOUPMENT AND PREDATORY PRICING

ANALYSIS





Louis Kaplow*




ABSTRACT

      Recoupment inquiries play an increasingly important role in antitrust analysis, yet they
      raise a number of conundrums: How can a failure of recoupment due to the plausible
      long-run profit recovery being dwarfed by short-run losses be reconciled with a defense
      of no predation that presupposes no short- run sacrifice to begin with? How can recoup-
      ment inquiries be diagnostic with respect to competing explanations for defendants'
      behavior-such as product promotion or legal predation-that likewise require re-
      coupment? This article addresses these questions and others by grounding recoupment
      and predatory pricing analysis more broadly in a decision framework that focuses on
      classification (distinguishing illegal predation from other explanations for firms' pricing)
      and on the magnitudes of the deterrence benefits and chilling costs of imposing liability.
      Regarding the latter, although concerns for the chilling of procompetitive activity sens-
      ibly drive predatory pricing analysis, the great variation in chilling costs across compet-
      ing explanations for alleged predation is unrecognized. Much of the analysis here is not
      particular to recoupment; the investigation aims to inform future research, policy,
      and practice regarding many aspects of predatory pricing as well as other forms of
      anticompetitive conduct.

      JEL CODES: K21, L12, L41.






    Harvard University and National Bureau of Economic Research. Hauser Hall, Harvard Law School,
    1575 Mass. Ave., Cambridge, MA 02138 USA, Email: meskridge@law.harvard.edu. I am grateful to
    Richard Gilbert, Scott Hemphill, Michael Katz, Douglas Melamed, Joseph Podwol, Daniel
    Rubinfeld, Carl Shapiro, Steven Shavell, Glen Weyl, Abe Wickelgren, the editors and referees, and
    participants at Berkeley, Georgetown, Harvard, Stanford, the American Law and Economics
    Association, and the Searle Center Conference on Antitrust Economics and Competition Policy
    for helpful discussions and comments; Michael Atamas, Avi Grunfeld, Jesse Gurman, Jeffrey Harris,
    Bradley Love, William Millikan, Carsten Koenig, Kolja Ortmann, and Ethan Stevenson for research
    assistance; and Harvard University's John M. Olin Center for Law, Economics, and Business for
    financial support. Related issues regarding market power, the structure of legal rules, legal institu
    tions, and screening are addressed in a companion paper (Kaplow 2018b). Disclaimer: I occasionally
    consult on antitrust cases, and my spouse is in the legal department of a financial services firm.
© Louis Kaplow. All rights reserved.

© The Author(s) 2018. Published by Oxford University Press on behalf of The John M. Olin Center for Law, Economics and
Business at Harvard Law School.
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License
(http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any
medium, provided the original work is properly cited. For commercial re-use, please contact joumals.permissions@oup.com
doi:10.1093/jla/lay003

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