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Dennis W. Carlton, Patrick Greenlee, Michael Waldman
NBER Working Paper No. 14199
Issued in July 2008
NBER Program(s): IO
---- Abstract -----
In response to the "standardless" approach used in LePage's v. 3M, the Antitrust Modernization Commission (AMC) and others advocate using a discount allocation approach to assess whether bundled loyalty discounts violate Section 2 of the Sherman Act. This approach treats loyalty discounts like predatory pricing. The analogy to predatory pricing is flawed. We propose an alternative approach that focuses on the presence of significant scale economies. We use our approach to analyze LePage's, as well as the recent PeaceHealth decision.
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