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A Dynamic Model of Predation

Patrick Rey, Yossi Spiegel and Konrad Stahl

No 22-1375, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: 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)
Date: 2022-10-24
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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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:127458

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