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Strategic Buyers and Market Entry

Lisa Bruttel and Jochen Gl�ckner

No 44, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing. Such prohibitions are usually based on the economic grounds that monopolistic pricing is likely to occur in the long run, causing harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that no competitor will (re-)enter the market in this subsequent phase. Our two experiments indicate that both assumptions are not backed up by actual decision making both of consumers and of competitors. Moreover, we find that consumers use their market power in order to maintain long-run competition.

Keywords: Predatory Pricing; Recoupment; Experiment (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-com, nep-exp, nep-ind and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Journal Article: STRATEGIC BUYERS AND MARKET ENTRY (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:twi:respas:0044

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