Salience As a Basis for Excessive Pricing Intervention in an Antitrust Context

Posted by Social Science Research Network

Salience As a Basis for Excessive Pricing Intervention in an Antitrust Context

Omar Patricio Vásquez Duque (University of Chile)

Abstract:      Excessive pricing is one of the most controversial topics in competition law and policy. Intervention is usually justified on the grounds of a welfare analysis that assesses when a monopolist or near-monopolist charges prices that are considerably and persistently above those that would prevail in a competitive context. Under this view, however, circumstantial lock-in would not meet the standard. This problem can be subject to an unconscionability test, in a consumer protection context. This article argues that “salience” can provide a reason to reproach multi-dimensional prices in contexts where there was competition ex-ante and lock-in ex-post, turning a competing firm into a circumstantial monopolist. As long as a significant number of consumers does not consider the price dimension under scrutiny in their decision-making, antitrust intervention can ultimately facilitate competition where consumer protection authorities do not address such problems. By condemning excessive multi-dimensional prices, I argue, markets would lead to equilibria where consumers would not find “unfair surprises” but a salient up-front price that would enhance competition among different suppliers.