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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.

Suggested Citation

  • 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. 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.
    2. 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.
    3. Michael Faure & Xinzhu Zhang (ed.), 2011. "Competition Policy and Regulation," Books, Edward Elgar Publishing, number 13912.
    4. 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.
    5. Stefan Weishaar, 2011. "The Legal Regime Preventing Predation in the People’s Republic of China: A Law and Economics Analysis," Chapters,in: Competition Policy and Regulation, chapter 13 Edward Elgar Publishing.

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