The US Court of Appeals rules that marginal cost rather than average variable cost may be an appropriate cost measure in predatory pricing cases (AMR)

The Decision in AMR Between 1995 and 1997, several low cost carriers entered certain airline routes between Dallas/Fort Worth Airport and other cities that American Airlines serves and undercut American’s fares. American responded to the new competition by lowering prices and increasing capacity by adding flights or using larger planes, in both cases drawing planes from other purportedly profitable routes. In each instance, American’s conduct allegedly forced the low cost carrier to either move its operations to different routes or cease competing altogether. After the low cost carriers had exited the routes, American generally reduced capacity and raised prices to levels roughly comparable to those before the low-fare competitors entered. The government alleged that American designed

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Authors

  • Sidley Austin (Washington)
  • WilmerHale (Washington)
  • Stanford University
  • WilmerHale (Washington)

Quotation

James W. Lowe, Leon B. Greenfield, Douglas Melamed, Thomas Mueller, The US Court of Appeals rules that marginal cost rather than average variable cost may be an appropriate cost measure in predatory pricing cases (AMR), 3 July 2003, e-Competitions July 2003, Art. N° 37272

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