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PREDATORY PRICING: The process in which a firm with market control reduces prices below average total cost with the goal of forcing competitors into bankruptcy. This practice is most commonly undertaken by oligopoly firms seeking to expand their market shares and gain greater market control. Predatory price has been outlawed by antitrust laws, but it can be difficult to prove, and is thus likely exists more than most people think.
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PERFECT COMPETITION, SHUTDOWN A perfectly competitive firm is presumed to shutdown production and produce no output in the short run, if price is less than average variable cost. This is one of three short-run production alternatives facing a firm. The other two are profit maximization (if price exceeds average total cost) and loss minimization (if price is greater than average variable cost but less than average total cost).
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
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"Every generation of Americans needs to know that freedom exists not in doing what we like, but in having the right to do what we ought. " -- Pope John Paul II
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JPUBE
Journal of Public Economics
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