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”, TSE Working Paper, n. 22-1375, October 2022, revised April 2024.
See also
Published in
TSE Working Paper, n. 22-1375, October 2022, revised April 2024