Marketing Papers

Document Type

Technical Report

Date of this Version

2014

Publication Source

American Economic Review

Volume

104

Issue

3

Start Page

868

Last Page

897

DOI

10.1257/aer.104.3.868

Abstract

We formally characterize predatory pricing in a modern industry-dynamics framework that endogenizes competitive advantage and industry structure. As an illustrative example we focus on learning-by-doing. To disentangle predatory pricing from mere competition for efficiency on a learning curve we decompose the equilibrium pricing condition. We show that forcing firms to ignore the predatory incentives in setting their prices can have a large impact and that this impact stems from eliminating equilibria with predation-like behavior. Along with predation-like behavior, however, a fair amount of competition for the market is eliminated.

Copyright/Permission Statement

Originally published in American Economic Review © 2014 by the American Economic Association.

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Date Posted: 15 June 2018

This document has been peer reviewed.