A Dynamic Model of Predation

Patrick Rey, Yossi Spiegel and Konrad Stahl

No 17428, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the feasibility and profitability of predation in a parsimonious infinite-horizon, complete information setting where an incumbent may face an entrant, in which case it needs to decide whether to accommodate or predate it. If the entrant exits, a new entrant is born with positive probability. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, predation with no future entry, and predation with hit-and-run entry. We use the model to study alternative antitrust policies, derive the best rules for these policies, and compare their welfare effects.

Keywords: Predation; Accommodation; Entry; Legal rules; Markov perfect equilibrium (search for similar items in EconPapers)
JEL-codes: D43 L41 (search for similar items in EconPapers)
Date: 2022-07
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Related works:
Working Paper: A Dynamic Model of Predation (2024)
Working Paper: A Dynamic Model of Predation (2024)
Working Paper: A Dynamic Model of Predation (2024)
Working Paper: A Dynamic Model of Predation (2022)
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