Predation and its rate of return: the sugar industry, 1887–1914
AbstractWe 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 a lower bound to predicted competitive price-cost margins that we show to exceed observed margins. Predation occurred only when its relative cost to the dominant firm, the American Sugar Refining Company (ASRC), was small. Its most clear effect was to lower the acquisition price of entrants and small incumbents. It may also have deterred future capacity additions and raised ASRC's share of industry profits. Predation operated by strengthening ASRC's reputation as a willing predator.
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Bibliographic InfoArticle provided by RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 37 (2006)
Issue (Month): 1 (03)
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Other versions of this item:
- David Genesove & Wallace Mullin, 2006. "Predation and Its Rate of Return: The Sugar Industry, 1887Ð1914," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 47-69, Spring.
- David Genesove & Wallace P. Mullin, 1997. "Predation and Its Rate of Return: The Sugar Industry, 1887-1914," NBER Working Papers 6032, National Bureau of Economic Research, Inc.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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