The legal 'meeting-competition' defense, which allows companies to match a competitor's price, actually harms consumers and reduces overall economic welfare.
Standard legal and economic logic suggests that allowing firms to lower prices to match competitors is inherently pro-competitive. This paper reveals that in markets with asymmetric competition, this defense facilitates price discrimination that ultimately lowers total output and reduces consumer surplus.
Meeting Competition, Losing Welfare: Input Price Discrimination under Asymmetric Upstream Competition
SSRN · 6507101
We examine the welfare effects of the Robinson–Patman Act’s meeting-competition defense in a secondary-line setting. In a successive-oligopoly model, a multi-market input supplier serves two input markets with different competitive intensity, while two downstream firms compete in a final-good market and each sources from a different input market. Relative to uniform-pricing, discriminatory input pricing reduces total downstream output whenever upstream competitive pressure differs across markets