If a firm cuts its price in response to a competitor cutting its price first, that may be a defense of meeting competition so that it has not violated Robinson-Patman.

Question

Quizplus · Accepted Answer

This is correct. A firm can argue that it was only responding to a competitor's price cut and therefore did not violate the Robinson-Patman Act, which prohibits unfair price discrimination. This defense is known as meeting competition. However, the firm must demonstrate that its price was not below its average variable cost and that it had a reasonable basis for believing that the competitor's price was lower.

If a Firm Cuts Its Price in Response to a Competitor