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The Learning Curve, Market Dominance and Predatory Pricing

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Author Info

  • Cabral, L.
  • Riordan, M.

Abstract

Strategic 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 Info

Paper provided by Boston University - Industry Studies Programme in its series Papers with number 39.

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Length: 50 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:fth:bostin:39

Contact details of provider:
Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.
Phone: 617-353-4389
Fax: 617-353-444
Email:
Web page: http://www.bu.edu/econ/isp/
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Related research

Keywords: prices ; enterprises ; economic equilibrium;

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