Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 17 of 36 - Oligopoly
Section 19 of 22
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Antitrust laws have been used to ban or limit some business practices with less obvious effects, including
-1- resale price maintenance
-2- predatory pricing
-3 - tying
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-2- Predatory Pricing
Firms with market power, which is all firms except those in perfectly competitive markets, normally use the power to raise prices.
Should policymakers be concerned firms with market power could instead charge too low prices?
Consider the case of a large airline “Coyote Air” that at first has a monopoly on some route.
“Roadrunner Express” then starts service on the same route and takes 20 percent of the market.
In response, Coyote starts cutting its fares.
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Antitrust analysts might argue Coyote's move is anticompetitive.
The price cuts may be intended to drive out Roadrunner so Coyote can recapture its monopoly and raise prices.
Such behavior is called predatory pricing.
Predatory pricing is a common claim in antitrust suits.
Some economists are skeptical of this argument.
They believe predatory pricing is rarely, maybe never, a profitable business strategy.
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For predatory pricing to drive out a rival prices must be driven below cost, which is in this case the same for the two airlines.
If Coyote starts selling lower-than-cost tickets it will have to fly more planes
because low fares will attract more customers.
Roadrunner can respond to Coyote's predatory move by cutting back on flights.
As a result, Coyote ends up incurring substantial losses, putting Roadrunner in a good position to survive the price war.
As in the Coyote-Roadrunner cartoons, here the predator suffers more than the prey.
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Even if Roadrunner exits the market, nothing stops a new other competitor from entering when prices return to normal.
This new competing firm may have a lower cost model and deep-pocket investors.
So, Coyote might never recover its predatory pricing losses through returned monopoly prices.
Profits from the in-between Roadrunner’s exit and new competitors’ entrance monopoly situation are uncertain, delayed, and/or disabled by the new entry.
… …
predatory pricing
ryakudatsu-teki kakaku settei
掠奪的価格設定
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AI is very helpful for language study:
Is this also correct? without 的 - 掠奪価格設定
ChatGPT:
The phrase 掠奪価格設定 is not wrong, but it is unusual and incomplete compared to the more standard form 掠奪的価格設定.
Here's why:
掠奪的価格設定
Standard and grammatically complete.
的 (てき) turns 掠奪 into an adjective meaning “predatory”
Literally: "Predatory-style price setting"
Common structure in Japanese:
[Noun] + 的 + [Noun] → adjective phrase
Example: 戦略的計画 (strategic plan)
掠奪価格設定
Lacks the 的, so it reads more like:
"Plunder price setting"
Sounds a bit harsh or unnatural, almost like literal looting pricing.
Not the typical way Japanese expresses this economic concept.
Analogy:
In English, compare:
Predatory pricing (natural)
Plunder pricing (awkward)
Recommendation:
Use 掠奪的価格設定 or possibly 略奪的価格設定 if aiming for a more common character.
If you're writing in an academic, legal, or business context, 掠奪的価格設定 is safest and most correct.
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