Competition versus Predation in Aviation Markets

Chapter 12A Case of Beer and Pretzels

William G. Morrison

1. Introduction

Predatory pricing is a notoriously slippery concept due to the apparent existence of a fine line between healthy competition (in which falling prices and increased productive efficiency benefit consumers over the long term) and the possibility of unhealthy competition (in which consumers enjoy lower prices initially only to be faced with the consequences of market power in the future). The dynamic evolutionary nature of market structures lies at the heart of the debate: how can we tell over a given period of time, whether observed competition in a market is likely to continue into the future given the possibilities of either naturally occurring or strategic entry and exit? ...