Hunting Unicorns? Experimental Evidence on Predatory Pricing

Armin Schmutzler, Aaron Edlin, Catherine Roux and Christian Thoeni
Authors registered in the RePEc Author Service: Christian Thöni

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: The paper provides an experimental analysis of above-cost predatory pricing in a multi-period interaction between a monopolistic incumbent and a potential entrant. It shows that, without policy interventions, the threat of post-entry price cuts discourages entry without forcing incumbents to abstain from monopoly pricing. A policy suggested by Edlin that curtails such price cuts encourages entry and reduces the prices set by monopolistic incumbents. An alternative policy suggested by Baumol that prohibits post-exit price increases does less to encourage entry, and it does not prevent high pre-entry prices. However, as expected, it keeps post-exit prices low.

JEL-codes: C92 D43 L13 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145814

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