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A Dynamic Model of Predation

Patrick Rey, Yossi Spiegel and Konrad O. Stahl

No 9819, CESifo Working Paper Series from CESifo

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
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-law and nep-mic
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