The oligopolistic pricing problem: A suggested price freeze remedy

The problem of oligopoly pricing challenges both economic theory and practical antitrust enforcement. While economic theory tries to explain various strategies of firms in oligopoly markets (mainly pricing and output strategies), antitrust scholars and enforcers try to construct an effective remedy for what is believed to be a prevailing problem of monopolistic pricing. So far these attempts have been only partially successful. Although the economic scholarship has made significant advances in recent years, especially in developing models based on modern game theory learning, we still do not have conclusive and comprehensive knowledge on oligopoly pricing. Antitrust enforcement also did not come up with novel meaningful suggestions in recent years.; In this dissertation I introduce and develop a somewhat different approach to dealing with oligopoly pricing. This approach builds on previous work concerning price and quantity freezes, mainly in the context of monopolization by predation. This work, primarily by Williamson and more recently by Edlin, basically suggested that new entry to a monopolistic market would freeze the pre-entry output production level or the pre-entry price of the incumbent monopolist. This would arguably encourage new entries by firms as well as more pre-entry output or lower pre-entry prices of monopolists. What I propose in this dissertation is the implementation of a price freeze scheme in oligopoly markets according to which an oligopolist that appreciably lowers its price would freeze its rivals' prices at their higher level for a defined period of time. This price freeze scheme, as I will demonstrate later on, will increase the incentive of oligopolists to set ax ante lower prices.