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A Dynamic Model of Predation

Author

Listed:
  • Patrick Rey
  • Yossi Spiegel
  • Konrad Stahl

Abstract

We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite‐horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving.

Suggested Citation

  • Patrick Rey & Yossi Spiegel & Konrad Stahl, 2025. "A Dynamic Model of Predation," RAND Journal of Economics, RAND Corporation, vol. 56(4), pages 738-755, December.
    • Handle: RePEc:bla:randje:v:56:y:2025:i:4:p:738-755
    DOI: 10.1111/1756-2171.70027
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    Cited by:

    1. is not listed on IDEAS
    2. Fabian Raoul Pieroth & Ole Petersen & Martin Bichler, 2025. "Algorithmic Predation: Equilibrium Analysis in Dynamic Oligopolies with Smooth Market Sharing," Papers 2510.27008, arXiv.org.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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