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 predation may be welfare improving.
Keywords
predation; accommodation; entry; legal rules; Markov perfect equilibrium;
JEL codes
- D43: Oligopoly and Other Forms of Market Imperfection
- L41: Monopolization • Horizontal Anticompetitive Practices
Reference
Patrick Rey, Yossi Spiegel, and Konrad Stahl, “A Dynamic Model of Predation”, The RAND Journal of Economics, June 2024, forthcoming.
See also
Published in
The RAND Journal of Economics, June 2024, forthcoming