A Dynamic Model of Predation

Patrick Rey, Yossi Spiegel () and Konrad Stahl ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We study the feasibility and profitability of predtion 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 predtion may be welfare improving.

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)
Pages: 43
Date: 2024-04
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth, nep-ind, nep-mic and nep-reg
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https://www.crctr224.de/research/discussion-papers/archive/dp529 (application/pdf)

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 (2022)
Working Paper: A Dynamic Model of Predation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2024_529

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