A Simple Theory of Predation
AbstractWe propose a simple theory of predatory pricing, based on scale economies and sequential buyers (or markets). The entrant (or prey) needs to reach a critical scale to be successful. The incumbent (or predator) is ready to make losses on earlier buyers so as to deprive the prey of the scale it needs, thus making monopoly profits on later buyers. Several extensions are considered, including markets where scale economies exist because of demand externalities or two-sided market effects, and where markets are characterised by common costs. Conditions under which predation may take place in actual cases are also discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.15.
Date of creation: Feb 2010
Date of revision:
Anticompetitive Behaviour; Exclusion; Below-Cost Pricing; Antitrust;
Other versions of this item:
- Chiara Fumagalli & Massimo Motta, 2010. "A Simple Theory of Predation," CSEF Working Papers 255, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Chiara Fumagalli & Massimo Motta, 2012. "A Simple Theory of Predation," Working Papers 437, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Fumagalli, Chiara & Motta, Massimo, 2009. "A Simple Theory of Predation," CEPR Discussion Papers 7372, C.E.P.R. Discussion Papers.
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-06 (All new papers)
- NEP-COM-2010-03-06 (Industrial Competition)
- NEP-IND-2010-03-06 (Industrial Organization)
- NEP-LAW-2010-03-06 (Law & Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B. Douglas Bernheim & Michael D. Whinston, 1998.
Journal of Political Economy,
University of Chicago Press, vol. 106(1), pages 64-103, February.
- Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
- B. Douglas Bernheim & Michael D. Whinston, 1996. "Exclusive Dealing," NBER Working Papers 5666, National Bureau of Economic Research, Inc.
- B. Douglas Bernheim & Michael D. Whinston, . "Exclusive Dealing," Working Papers 96008, Stanford University, Department of Economics.
- Innes, Robert & Sexton, Richard J, 1994. "Strategic Buyers and Exclusionary Contracts," American Economic Review, American Economic Association, vol. 84(3), pages 566-84, June.
- Paul Milgrom & John Roberts, 1997.
"Predation, reputation , and entry deterrence,"
Levine's Working Paper Archive
1460, David K. Levine.
- Liliane Karlinger & Massimo Motta, 2012. "Exclusionary Pricing When Scale Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 75-103, 03.
- Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
- Liliane Karlinger & Massimo Motta, 2007.
"Exclusionary Pricing and Rebates When Scale Matters,"
Economics Working Papers
ECO2007/30, European University Institute.
- Karlinger, Liliane & Motta, Massimo, 2007. "Exclusionary Pricing and Rebates When Scale Matters," CEPR Discussion Papers 6258, C.E.P.R. Discussion Papers.
- Gans, Joshua S. & King, Stephen P., 2002. "Exclusionary contracts and competition for large buyers," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1363-1381, November.
- Kreps, David M. & Wilson, Robert, 1982.
"Reputation and imperfect information,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 253-279, August.
- Dennis W. Carlton & Michael Waldman, 2002.
"The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries,"
RAND Journal of Economics,
The RAND Corporation, vol. 33(2), pages 194-220, Summer.
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," NBER Working Papers 6831, National Bureau of Economic Research, Inc.
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State.
- Fumagalli, Chiara & Motta, Massimo, 2002.
"Exclusive Dealing and Entry, when Buyers Compete,"
CEPR Discussion Papers
3493, C.E.P.R. Discussion Papers.
- Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-45, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah).
If references are entirely missing, you can add them using this form.