The authors discuss zero-price products and the procompetitive economic incentives for such pricing arrangements.
“Free” products have recently been the focus of many antitrust investigations and complaints, both in the U.S. and abroad. “Free” products have gained particular prominence in the digital economy. The antitrust community, including regulatory agencies, is faced with the challenge of how to assess whether behavior related to zero-price products is anticompetitive, as many metrics for analyzing competition usually rely on a measure of price.
While it is possible for anticompetitive conduct to exist in markets containing “free” or zero-price products, there are clear procompetitive economic incentives for such pricing arrangements. Understanding these incentives and the mechanisms through which zero-price products are offered is critical to understanding the evolving legal and regulatory environment. In this article, authors Lesley Chiou of Occidental College and Avigail Kifer of Cornerstone Research lay out these incentives and mechanisms, and then discuss the role that quality plays in markets with zero-price goods.
This article was originally published by Competition, a law journal published by the Antitrust and Unfair Competition Law Section of The California Lawyers Association, in November 2022.
The views expressed herein do not necessarily represent the views of Cornerstone Research.