A Dynamic Model of Predation

Patrick Rey, Yossi Spiegel and Ernst Konrad Stahl
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Patrick Rey: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Yossi Spiegel: TAU - Tel Aviv University
Ernst Konrad Stahl: University of Mannheim = Universität Mannheim

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

Keywords: arkov perfect equilibrium; legal rules; entry; accommodation; predation (search for similar items in EconPapers)
Date: 2025
Note: View the original document on HAL open archive server: https://hal.science/hal-05483810v1
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Published in RAND Journal of Economics, 2025, 56 (4), pp.738-755. ⟨10.1111/1756-2171.70027⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05483810

DOI: 10.1111/1756-2171.70027

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