Standard Oil and Predatory Pricing: Myth Paralleling Fact |
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Authors: | James A Dalton Louis Esposito |
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Institution: | (1) Department of Economics, University of Milan, Bicocca and Intertic, P.za Ateneo Nuovo 1, 20126 Milan, Italy |
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Abstract: | The Supreme Court in 1911, on the occasion of the first major test of the Sherman Act, ordered the dissolution of the Standard
Oil Trust. In his 1958 paper John McGee argued that predatory pricing is, in general, irrational and, relying solely on the
information in the Trial Record related to that decision, concluded that Standard Oil did not engage in predatory pricing.
His paper has had an extraordinary influence on both antitrust policy in the United States and economic lore. This paper documents
the breadth and scope of the influence of McGee’s paper and offers several possible explanations for it. We suggest four reasons:
(1) the lack of a theoretical challenge for 25 years, (2) the failure of scholars to replicate McGee’s empirical findings,
(3) the unique status of the Standard Oil case in the history of American antitrust and (4) the influence of the Chicago School
on economic and legal thinking. |
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