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Predation, Firm-Specific Assets and Diversification

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  • Levy, David T

Abstract

This study examines the relationship between diversification and predation, focusing on the firm's investments in sunk cost assets. Unlike the single product firm, the diversified firm may employ assets that are not sunk to a product. The ability to transfer these assets among uses or locations may lower the costs of predation. The "long-purse" and "multimarket reputation" may be viewed as special cases of this phenomenon. The likelihood of predation may be reduced when the diversified firm is the target, since it may be able to transfer assets back into an industry when the predator raises the price. Copyright 1989 by Blackwell Publishing Ltd.

Suggested Citation

  • Levy, David T, 1989. "Predation, Firm-Specific Assets and Diversification," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 227-233, December.
    • Handle: RePEc:bla:jindec:v:38:y:1989:i:2:p:227-33
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    Cited by:

    1. Spiros Bougheas & Saksit Thananittayaudom, 2006. "Financial Predation by the "Weak"," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 5(3), pages 231-244, December.
    2. Davide Vannoni, 2000. "The diversifield firm: non formal theories versus formal models," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2000(106).
    3. George, Emmanuel & Odejimi, Deborah & Matthews, Oluwatoyin & Ojeaga, Paul, 2013. "Is Privatization Related With Macroeconomic Management? Evidence From Some Selected African Countries," MPRA Paper 62211, University Library of Munich, Germany, revised 04 Aug 2014.
    4. Lindsey, Robin & West, Douglas S., 2003. "Predatory pricing in differentiated products retail markets," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 551-592, April.
    5. Fabrice Rousseau;, 1999. "Signalling with Debt Maturity Choice," Economics Department Working Paper Series n971099.pdf, Department of Economics, National University of Ireland - Maynooth.

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