Frank and Lillian Gilbreth: Critical Evaluations in Business and Management

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Predatory pricing has long been a contentious issue among lawmakers and economists. Legal actions are continually brought against companies. But the question remains: how likely are firms to cut prices in order to drive rivals out of business? Predatory firms risk having to keep prices below cost for such an extended period that it would become cost-prohibitive. Recently, economists have turned to game theory to examine circumstances under which predatory tactics could be profitable.

John R. Lott, Jr. provides long-awaited empirical analysis in this book. By examining firms accused of or convicted of predation over a thirty-year period of time, he shows that these firms are not organized as the game-theoretic or other models of predation would predict. In contrast, what evidence exists for predation suggests that government enterprises are more of a threat.

Lott presents crucial new data and analysis, attacking an issue of major legal and economic importance. This impressive work will be of great interest to economists, legal scholars, and antitrust policy makers.

Customer Reviews:

Some thoughts on Eric Hellard's review.......2002-11-09

I haven't read the book, but I wish here to comment on Mr Hellard's interesting review.
Mr Hellard writes "Lott extends this idea by arguing that an entrant facing an incumbent with a reputation for toughness should take a short position in the incumbent's stock, enter, and reap trading profits" It's a good idea, but 1) not every company is quoted on the Stock Exchange ! and 2) the price variations of the stock can be dependent on many other factors besides the incumbent/entrant rivalry (especially nowadays...).

I agree that state-owned firms are especially prone to predatory pricing and other anti-competitive behavior. I have been working for 8 years in the French telecommunications market, and the French state monopoly (France Telecom) has always tried everything legal and illegal to stifle competition. Predatory pricing is one of France Telecom's many weapons.
Officially, the French market was open to competition in 1998, but in reality many key services have remained in the grips of France Telecom so far, which has allowed the behemoth to lower charges on competitive services, while charging sometimes the equivalent of 10 times the U.S. rate on some other vital services which are not yet fully open to competition (like leased lines).

Predation or Prevarication?.......2002-02-26

Lott neatly dissects the case for predatory pricing in a logical manner that evidences a thorough grounding in the economic literature. He marshalls convincing empirical evidence through statistical modelling that dovetails nicely with the illustrative examples he provides. Taking each point in hand, he makes the case against predatory pricing in private enterprise, while developing a clear picture of why it can and does occur in the public sector. A must read for the policy-maker and anti-trust supporters, his thoughtful critique will stand as an important work for years to come.

by Eric A. Helland.......2001-02-27

In the 1960s and 1970s, the conventional wisdom in the economics of industrial organization was that monopoly power was pervasive and that a strong antitrust policy was needed to combat such power. A small band of economists and lawyers associated with the University of Chicago attacked the conventional wisdom, knocking out the theoretical underpinnings of antitrust law in general and the theory of predatory pricing in particular. The Chicago School analysts showed that, in theory, predatory pricing was unlikely to work because it required the predator to lower prices on an increased quantity of product, thereby taking large losses in the short run. Moreover, even if the competitor were driven out of business, the higher long-run price needed to recoup the short-run loss would encourage entry, and in the final accounting the predation would prove unprofitable. Empirical analysis backed up the Chicago School theory. Indeed, economists could not adduce a single clear-cut case of actual predatory pricing-hence, the title of the survey article by Roland H. Koller II, "The Myth of Predatory Pricing" (Antitrust Law and Economics Review 4 [summer 1971]: 105-23).

As the Chicago School ideas triumphed in Washington, they came under attack in the academy. One source of attack was the new industrial organization (NIO), based on game theory, which was revolutionizing all areas of economics. More recently, the analysis of "path dependence" has formed a second prong of attack. The game theorists created a host of models showing that with certain assumptions about information, strategy, and the structure of the game, a threat to use predatory pricing could, in theory, be profitable.

John Lott's book Are Predatory Commitments Credible? Who Should the Courts Believe? is the second major counterattack from the Chicago School.

If firms accused of predatory pricing do not seem to differ systematically from the control group, is any firm capable of following a predatory-pricing strategy? In effect, could any organization commit to not maximizing profits, if only for a limited period of time? Lott's answer is that one group of firms can make such a commitment: publicly owned firms. The basic idea comes from Niskanen's model (William Niskanen, Bureaucracy and Representative Government [Chicago: Aldine Atherton, 1971]): publicly owned firms maximize size rather than profit. Lott gives several examples, but none hits closer to home than the public university, which must maintain enrollment in order to maintain the size of the faculty and therefore sets prices considerably below costs.

Lott's second type of evidence that publicly owned firms practice price predation is the fact that dumping cases-the international version of predatory-pricing complaints-have been filed under the General Agreement on Tariffs and Trade more frequently against firms from communist countries than against firms from noncommunist countries. Lott shows, therefore, that the NIO theory of predatory pricing makes sound predictions (hawks practice predatory pricing more than doves), but it has limited application to the private-enterprise system, to which its advocates intended it to apply.

Lott's third argument supplements the theory of predatory pricing. He extends Jack Hirshleifer's observation that inventors of public goods can internalize at least some of the value of their invention by taking long or short positions in assets whose price will change after the discovery is made public (see Jack Hirshleifer, "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review 61 [1971]: 561-74). Lott extends this idea by arguing that an entrant facing an incumbent with a reputation for toughness should take a short position in the incumbent's stock, enter, and reap trading profits. In effect, the incumbent firm with a reputation for toughness finances the entry of its own competitors. The entrant can also make profits by exiting. If the entrant enters and finds that it cannot withstand the attack of the hawk, it can take a long position in the incumbent's stock, exit, and collect the trading profits. Either way, trading profits increase the incentive to enter because whether or not entry ultimately succeeds, trading profits allow the entrant to make a profit. As Lott puts it, "the more successfully a predator deters entry, the greater the return that trading profits create toward producing new entry. Creating a reputation to predate can thus be self-defeating" (p. 115).

Lott's trading-profits theory is alone worth the price of the book-a credit to Lott and an indictment of the NIO. One of the basic insights of economics is that well-established markets threaten rents. Lott's simple application of this wisdom ought to change the way economists think about antitrust cases and the way they are litigated both as private and as public cases. The notion that trading profits can mitigate or eliminate the private damage from predatory pricing should certainly give antitrust experts cause to worry about the efficiency of treble damages. I await the day when the defendant in an antitrust case will respond, "If my actions were predatory, why didn't the plaintiff just buy my stock short and use the profits to stay in the market."

Terrific book.......2000-06-20

If you like logical discussions that lead to insights you had not anticipated, this is a book you will enjoy. One such insight is that the predatory commitments of government agencies are likely to be more credible than the predatory commitments of private firms. Lott's book is one of those infrequently found books that requires that you sip a glass of wine as you read one chapter each night, and enjoy taking both the book and wine slowly. Very highly recommended.

Lott Are Predatory Commitments Credible?.......2000-04-12

Predatory practices occupy a peculiar position in economic analysis. Empirical studies have debunked most claims of actual predation. At best, less than a handful of case exist in which predation might have been employed. Nevertheless, the problem has been analyzed extensively. The work in the 70s dealt with how to identify predation when it occurred. In the eighties, theories were devised to show that predation might be a sensible strategy in certain cases. However, no evidence was produced that these new theories had practical relevance. Lott seeks to deal with the issues. His work starts with a neat summary of the debate on predation. He formulates a clever model indicating what chacteristics a firm must have to encourage predation. He undertakes statistical tests to see whether firms accused of predation actually have the special characteristics that are needed. They do not. He goes on to add that because they are not concerned about profitability government enterprises are more likely than private firms to engage in predation. Data problems force him to rely on an indirect test, whether government-owned firms are more often accused of unfair practices in international trade. They are. He then adds an extension to the theory that considers the advantages a newcomer possesses. This is a valuable contribution. It clearly presents the basics and their tests.

Are Predatory Commitments Credible? Who Should the Courts Believe?(Review): An article from: Independent Review

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Are Predatory Commitments Credible? Who Should the Courts Believe?(Review): An article from: Independent Review
Eric A. Helland
Manufacturer: Independent Institute
ProductGroup: Book
Binding: Digital

General | Politics | Nonfiction | Subjects | Books

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This digital document is an article from Independent Review, published by Independent Institute on January 1, 2001. The length of the article is 1731 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

Citation Details
Title: Are Predatory Commitments Credible? Who Should the Courts Believe?(Review)
Author: Eric A. Helland
Publication: Independent Review (Refereed)
Date: January 1, 2001
Publisher: Independent Institute
Volume: 5 Issue: 3 Page: 449

Article Type: Book Review

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Are Predatory Commitments Credible?: Who Should the Courts Believe?

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Are Predatory Commitments Credible?: Who Should the Courts Believe?
John R. Jr Lott
Manufacturer: NY
ProductGroup: Book
Binding: Hardcover
ASIN: B000MUFYYK

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Are Predatory Commitments Credible?: Who Should the Courts Believe?
John R. Lott
Manufacturer: University Of Chicago Press
ProductGroup: Book
Binding: Paperback
ASIN: B000OPTU70

Testing whether predatory commitments are credible (Working paper)

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Testing whether predatory commitments are credible (Working paper)
John R Lott
Manufacturer: George J. Stigler Center for the Study of the Economy and the State, University of Chicago
ProductGroup: Book
Binding: Unknown Binding

Consolidation & Merger | Management & Leadership | Business & Investing | Subjects | Books

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The Open System Management Series: Open system management is a strategy that can be used with groups of all sizes to improve collaboration within and among organizations and the communities and families they serve. The volumes in this series illustrate how the method first described in Gary M. Nelson\'s Self-Governance in Communities and Families (Berrett-Koehler, 2000) can be applied in various settings.

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Great cookbook as well as stories about cowboy life!

Chuck Wagon Cookin'
Stella Hughes
Manufacturer: University of Arizona Press
ProductGroup: Book
Binding: Paperback

General | Baking | Cooking, Food & Wine | Subjects | Books
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Great cookbook as well as stories about cowboy life!.......2000-02-07

The book has some wonderful recipes for outdoor grub. Some are old and some don't use traditional units of measure. They are all great dishes, though. Stella also intersperses stories about camp cooks she has known, how they did things, what was important to them, etc. These stories are a great documentation of the western cowboy life. The section on sourdough is especially good.

Chuck Wagon Cookin', Authentic collection of Roundup lore, Cowboy Humor & Over 100 Old time Recipes

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Valuation and Selection of Convertible Bonds offers practical guidelines for selecting convertible bonds and making efficient investment decisions. Based on modern option theory and the most recent developments in investment analysis (including a chapter on Euro-bonds), this sourcebook will prove invaluable to both professional investors and individuals involved with similar financial transactions.

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This contributed volume explores the status of women in the economies of countries at various developmental stages. Issues covered include, first, evidence of economic and social inequality throughout the world. Second, gender inequality in many societies can be explained by inadequate investment in human capital. Third, by overlooking women's nonmarket output, countries generally overlook women's economic contributions to a nation. Finally, with economic progress women become healthier as well as better educated and trained. Part I addresses the interaction of economic development and gender inequality. Chapters explore gender inequality in newly industrialized countries, the effects of economic development on employment status in less developed countries in the Western Hemisphere, and the economic development and status of women in South Korea. Part II discusses the economic status of women in France, Mexico, and Nigeria. This section also presents models used to estimate labor force participation and earnings of men and women in Turkey. Part III covers special concerns facing women in several countries, including health issues, the status of women during the economic transition in Poland, the gap between actual and official labor force participation of women in Pakistan, and the impact of "social technology" on the economic status of women in India.

Economic Dimensions of Gender Inequality

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Economic Dimensions of Gender Inequality: A Global Perspective

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Economic Dimensions of Gender Inequality: A Global Perspective
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Book Description

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Investment Strategies After the New Tax Act

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Heartwarming

Just a Krooked Kid

Just a Krooked Kid
Goodwin Hale
Manufacturer: Goodwin Hale
ProductGroup: Book
Binding: Paperback

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Customer Reviews:

Heartwarming.......2006-02-25

My baby daughter was born with the condition arthrogryposis and I was keen to read about anothers experiences.

The story of Goodwins life was indeed a positive one and filled me with hope for my little girls future. Medical practices and society at large has moved on since goodwins childhood but it is an interesting insight into how the condition affected his every day life and how he overcame his obstacles and limitations.

The book had a general 'heartwarming' feel about it, and has a few funny exerpts as well. The book is the only biography I know of written by someone with arthrogryposis at present, and is a nice alternative to the medical based texts that can often paint a bleak picture of this condition.

The only problem with this book I found, is, as mentioned earlier, a lot has changed since Goodwins childhood and he grew up in a very different era, so it is hard to compare this to what my daughter will go through. However, there will still be much that she and I will relate to as she grows, such as how he negotiated his way around the house and feeding issues! This is a very personal opinion due to my circumstances, despite this, I would still recommend the book to to people either with the condition or to people who's loved ones are affected.

I will give this book to my daughter to read someday and I am currently passing it about family and friends who want a read also!

Overall a very inspirational read!

Just a Krooked Kid.......2004-07-14

After doing an Amazon search of the word "arthrogryposis", I found Goodwin Hale's book. I am a mother of a son with this condition and so I was interested in reading about Mr. Hale's life. His story is really inspirational and I was constantly stopping to read my husband excerpts from this book. The writing is lively and he has many amusing antecdotes about his growing up years. I am anxious to have my son read it. He is 15 and I think he will be able to relate to Mr. Hale's stories, although he did not grow up in a small town during the depression as Mr. Hale did. Despite the generational difference, his daily life as someone with arthrogryposis will be familiar to anyone with this condition. I would highly recommend his book for anyone with a loved one with this condition- they will be inspired by Mr. Hale. I would also recommend this book to anyone who just wants a positive read, many smiles and inspiration of someone that had difficult challenges from birth.

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