Faux predation in markets with imperfect information on product quality

When consumers and producers are asymmetrically informed about product quality, faux predation is shown to be a profitable method of inducing a rival firm to exit A successful episode of faux predation persuades an efficient rival to exit without requiring the faux predator to price below cost and recoup losses with higher prices in the future. Cost-based rules for establishing presumptive evidence of predatory intent and behavior-such as the Areeda-Turner rule-will fail to detect faux predation since pricing below unit costs is not necessary. Faux predation can damage competition yet go undetected and undeterred under present antitrust law.