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A Signaling Model of Predatory Pricing

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  • Roberts, John

Abstract

Predatory pricing involves pricing lower in the presence of competition than would otherwise be o ptimal in order to deter entry,induce exit, or discipline (reduce the future ou tput of) a rival. Signalling of private information about market conditions thro ugh price can give rise to predation aimed at the latter two objectives. However , in separating equilibrium, no extra exit or output reduction is induced relati ve to the full information benchmark. Nevertheless, such predation is not innocu ous, because the expectation of its occurrence may reduce entry. Copyright 1986 by Royal Economic Society.

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  • Roberts, John, 1986. "A Signaling Model of Predatory Pricing," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 75-93, Suppl. No.
    • Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:75-93
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    Cited by:

    1. Rafael Rocha Oliveira & Claudio Lucinda, 2024. "How do incumbents react to the exit of a potential competitor? Evidence from the airline sector," Working Papers, Department of Economics 2024_04, University of São Paulo (FEA-USP).
    2. Gunnar ALEXANDERSSON & Staffan HULTÉN, 2007. "High And Low Bids In Tenders: Strategic Pricing And Other Bidding Behaviour In Public Tenders Of Passenger Railway Services," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(2), pages 161-194, June.
    3. Gunnar Alexandersson & Staffan Hultén, 2006. "Predatory bidding in competitive tenders: A Swedish case study," European Journal of Law and Economics, Springer, vol. 22(1), pages 73-94, July.
    4. Yutian Chen & Wei Tan, 2012. "A Theory on Predatory Advertising After a Demand-Reducing Shock," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 38(4), pages 460-478.
    5. Rey, Patrick & Spiegel, Yossi & Stahl, Konrad, 2022. "A Dynamic Model of Predation," TSE Working Papers 22-1375, Toulouse School of Economics (TSE).
    6. Michael Faure & Xinzhu Zhang (ed.), 2011. "Competition Policy and Regulation," Books, Edward Elgar Publishing, number 13912.
    7. Walsh, Patrick Paul & Whelan, Ciara, 1999. "Loss leading and price intervention in multiproduct retailing: welfare outcomes in a second-best world1," International Review of Law and Economics, Elsevier, vol. 19(3), pages 333-347, September.
    8. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
    9. Stefan Weishaar, 2011. "The Legal Regime Preventing Predation in the People’s Republic of China: A Law and Economics Analysis," Chapters, in: Michael Faure & Xinzhu Zhang (ed.), Competition Policy and Regulation, chapter 13, Edward Elgar Publishing.

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