The Learning Curve, Market Dominance and Predatory Pricing
AbstractStrategic implications of the learning curve hypothesis are analyzed in the context of a price-setting, differentiated duopoly selling to a sequence of heterogeneous buyers with uncertain demands. A unique Markov perfect equilibrium is characterized and sufficient conditions are provided for market dominance to be self-reinforcing. Increasing market dominance implies that learning is privately disadvantageous. Finally, introducing avoidable fixed costs and possible exit into the model yields a new theory of predatory pricing based on the learning curve hypothesis. Copyright 1994 by The Econometric Society.
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Bibliographic InfoPaper provided by Boston University - Industry Studies Programme in its series Papers with number 0039.
Date of creation: Dec 1992
Date of revision:
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Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.
Web page: http://www.bu.edu/econ/isp/
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Other versions of this item:
- Cabral, Luis M B & Riordan, Michael H, 1994. "The Learning Curve, Market Dominance, and Predatory Pricing," Econometrica, Econometric Society, vol. 62(5), pages 1115-40, September.
- Cabral, L. & Riordan, M., 1992. "The Learning Curve, Market Dominance and Predatory Pricing," Papers 39, Boston University - Industry Studies Programme.
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