Monday, September 19, 2022

A Dynamic Model of Predation

A Dynamic Model of Predation

By:

Patrick Rey; Yossi Spiegel; Konrad O. Stahl

Abstract:

We study the feasibility and profitability of predation in a parsimonious infinite-horizon, complete information setting where an incumbent may face an entrant, in which case it needs to decide whether to accommodate or predate it. If the entrant exits, a new entrant is born with positive probability. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, predation with no future entry, and predation with hit-and-run entry. We use the model to study alternative antitrust policies, derive the best rules for these policies, and compare their welfare effects.

URL:

http://d.repec.org/n?u=RePEc:ces:ceswps:_9819&r=

https://lawprofessors.typepad.com/antitrustprof_blog/2022/09/a-dynamic-model-of-predation.html

| Permalink

Comments

Post a comment