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Predatory Pricing in the Presence of Network Effects: Evidence from the Lab

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  • Ruben van Oosten
  • Sander Onderstal

Abstract

In this paper, we study predatory pricing, market tipping, and collusion in laboratory markets with network effects. In repeated two-player Hotelling games, we compare three experimental treatments: no network effects, weak network effects, and strong network effects. The experimental results show that predatory pricing is more likely in markets with weak or strong network effects than in markets without network effects. In markets with strong network effects, there is more market tipping than in markets without network effects or with weak network effects. In markets with network effects, the increase in product value due to network effects is predominantly passed on to consumers through the increased number of predatory prices. There is no difference between treatments in the tendency to collude. We discuss some possible implications of our results for the way predatory pricing is evaluated within the context of antitrust law.

Suggested Citation

  • Ruben van Oosten & Sander Onderstal, 2026. "Predatory Pricing in the Presence of Network Effects: Evidence from the Lab," Journal of Law and Economics, University of Chicago Press, vol. 69(3), pages 649-691.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/738361
    DOI: 10.1086/738361
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