Predation and its rate of return: the sugar industry, 1887–1914
We study entry into the American sugar refining industry before World War I. We 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 predicted competitive price cost margins that we show to exceed observed margins. We argue that predation occurred only when the relative cost of it to the dominant firm was small, and that it was most probably used to deter future capacity additions. It was also used to lower the purchase price of preexisting firms after one entry episode.
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Volume (Year): 37 (2006)
Issue (Month): 1 (03)
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References listed on IDEAS
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.:
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- Marvin B. Lieberman, 1987. "Postentry Investment and Market Structure in the Chemical Processing Industries," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 533-549, Winter.
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