Predation and Its Rate of Return: The Sugar Industry, 1887-1914

David Genesove and Wallace P. Mullin

No 6032, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study entry into the American sugar refining industry before World War I. We show that the price wars following two major entry episodes were predatory. Our proof is twofold: by direct comparison of price to marginal cost, and by construction of predicted competitive price cost margins that we show to exceed observed margins. We argue that predation occurred only when the relative cost of it to the dominant firm was small, and that it was most probably used to deter future capacity additions. It was also used to lower the purchase price of preexisting firms after one entry episode.

JEL-codes: L13 L41 (search for similar items in EconPapers)
Date: 1997-05
Note: IO
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Citations: View citations in EconPapers (3)

Published as Genesove, David and Wallace P. Mullin. "Predation And Its Rate Of Return: The Sugar Industry, 1887-1914," Rand Journal of Economics, 2006, v37(1,Spring), 47-69.

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Journal Article: Predation and its rate of return: the sugar industry, 1887–1914 (2006)
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