threat of sharp price cuts to discourage competition. Predatory pricing is a violation of U.S. antitrust law, but it

is difficult to prove.

Consider a large airline that provides most of the flights between two particular cities. A new, small start-up

airline decides to offer service between these two cities. The large airline immediately slashes prices on this

route to the bone, so that the new entrant cannot make any money. After the new entrant has gone out of

business, the incumbent firm can raise prices again.

After the company repeats this pattern once or twice, potential new entrants may decide that it is not wise to

try to compete. Small airlines often accuse larger airlines of predatory pricing: in the early 2000s, for example,

ValuJet accused Delta of predatory pricing, Frontier accused United, and Reno Air accused Northwest. In 2015,

the Justice Department ruled against American Express and Mastercard for imposing restrictions on retailers
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