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Strategic Entry Deterrence: Pioneer Foods And The Bread Cartel

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  • Liberty Mncube

Abstract

Joseph Harrington studies whether cartel members can sustain cooperation over time under the threat of free entry in an infinitely repeated game and shows that firms can deter entry by credibly threatening to meet any entry with an episode of below-cost pricing. In this article, we provide direct evidence of predation through below-cost pricing in the cartelized South African bread industry by comparing prices to average variable costs. We find evidence of episodes of predatory pricing. While the Competition Commission case was settled before adjudication by the Competition Tribunal, Pioneer Foods admitted to the strong evidence of predatory intent and that its conduct impeded small independent bakeries from expanding within the market and competing effectively as part of the settlement agreement.

Suggested Citation

  • Liberty Mncube, 2013. "Strategic Entry Deterrence: Pioneer Foods And The Bread Cartel," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 637-654.
  • Handle: RePEc:oup:jcomle:v:9:y:2013:i:3:p:637-654.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht004
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    Cited by:

    1. Pasirayi, Simbarashe & Richards, Timothy J., 2023. "Assessing the impact of manufacturer power on private label market share in an equilibrium framework," Journal of Business Research, Elsevier, vol. 154(C).
    2. Liberty Mncube, 2014. "The South African Wheat Flour Cartel: Overcharges at the Mill," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 487-509, December.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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