A Dynamic Model of Predation
Yossi Spiegel and
No 22-1375, TSE Working Papers from Toulouse School of Economics (TSE)
Growing concern about the market power of big tech giants has led to renewed interest in predatory behavior. 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.
JEL-codes: D43 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-law, nep-mic and nep-reg
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