A Dynamic Model of Predation

 

A Dynamic Model of Predation

By:	Patrick Rey; Yossi Spiegel; Konrad Stahl
Abstract:	We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predtion may be welfare improving.
URL:	http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_529&r=ind