The Learning Curve, Predation, Antitrust, and Welfare

Luis Cabral and Michael H. Riordan

Journal of Industrial Economics, 1997, vol. 45, issue 2, 155-169

Abstract: An economic definition of predation is applied to a dynamic model of duopoly competition with learning curves. It is shown that rational predation occurs in equilibrium, although below‐cost pricing is neither a necessary nor a sufficient indicator of predation. A conceptual framework for antitrust analysis of predation shows that a prohibition of predation might help or harm consumer welfare depending on details of market structure, although the informational requirements of fashioning an effective legal rule against harmful predation are formidable.

Date: 1997
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