IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v15y1984isummerp229-243.html
   My bibliography  Save this article

A Policy to Prevent Rational Test-Market Predation

Author

Listed:
  • David Scharfstein

Abstract

This article models the problem of designing predation policy as one of structuring incentives so that firms choose not to practice predation but to engage in nonpredatory competition. The government decides how intensively to search for possible predatory incidents, how thoroughly to investigate each incident, and how much to penalize convicted predators. We consider test-market "bluffing" predation in which incumbents with high costs can deter entry into a national market by pretending to have low costs. If fines are merely transfers, the optimal fine is the largest one that is feasible. Furthermore, the government should avoid injunctions against "continued predatory pricing."

Suggested Citation

  • David Scharfstein, 1984. "A Policy to Prevent Rational Test-Market Predation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 229-243, Summer.
  • Handle: RePEc:rje:randje:v:15:y:1984:i:summer:p:229-243
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198422%2915%3A2%3C229%3AAPTPRT%3E2.0.CO%3B2-K&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Argenton, C., 2010. "Predation Under Perfect Information," Discussion Paper 2010-26, Tilburg University, Center for Economic Research.
    2. Bernard, Darren, 2016. "Is the risk of product market predation a cost of disclosure?," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 305-325.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:15:y:1984:i:summer:p:229-243. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: https://www.rje.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.