Excessive Pricing: Towards A Workable And Objective Rule

By Eduardo Saavedra & Javier Tapia – 

In this short note, we aim to advance towards the creation of a workable and objective rule for determining when a price should be deemed excessive – minimizing, at the same time, the risk of damaging innovation or research and development. We propose and formalize a test that combines different benchmarks to set a threshold. In a nutshell, if the price a super-dominant firm actually charges is below the threshold, there should be no review of t