IDEAS home Printed from https://ideas.repec.org/p/cmu/gsiawp/-878519102.html
   My bibliography  Save this paper

The economics of predation: What drives pricing when there is learning-by-doing?

Author

Listed:

Abstract

Predatory pricing - a deliberate strategy of pricing aggressively in order to eliminate competitors - is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated. The purpose of this paper is to formally characterizes predatory pricing in a modern industry dynamics framework. We endogenize competitive advantage and industry structure through learning-by-doing. We show that we can isolate and measure a firm's predatory incentives by decomposing the equilibrium pricing condition. Our decomposition maps into existing economic definitions of predation and provides us with a coherent and flexible way to develop alternative characterizations of a firm's predatory incentives. We ask three interrelated questions. First, when does predation-like behavior arise? Second, what drives pricing and, in particular, how can we separate predatory incentives for pricing aggressively from efficiency-enhancing incentives for pricing aggressively in order to move further down the learning curve? Third, what is the impact of predatory incentives on industry structure, conduct, and performance?

Suggested Citation

  • Yaroslav Kryukov & Ulrich Doraszelski & David Besanko, "undated". "The economics of predation: What drives pricing when there is learning-by-doing?," GSIA Working Papers 2011-E30, Carnegie Mellon University, Tepper School of Business.
  • Handle: RePEc:cmu:gsiawp:-878519102
    as

    Download full text from publisher

    File URL: https://student-3k.tepper.cmu.edu/gsiadoc/WP/2011-E30.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. R. E. Caves & M. E. Porter, 1977. "From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 91(2), pages 241-261.
    2. Dudley, Leonard, 1972. "Learning and Productivity Change in Metal Products," American Economic Review, American Economic Association, vol. 62(4), pages 662-669, September.
    3. Edlin, Aaron S. & Farrell, Joseph, 2002. "The American Airlines Case: A Chance to Clarify Predation Policy," Department of Economics, Working Paper Series qt0wx7c4zf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Ordover, Janusz A. & Saloner, Garth, 1989. "Predation, monopolization, and antitrust," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 9, pages 537-596 Elsevier.
    5. Ronald S. Jarmin, 1994. "Learning by Doing and Competition in the Early Rayon Industry," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 441-454, Autumn.
    Full references (including those not matched with items on IDEAS)

    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:cmu:gsiawp:-878519102. 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: (Steve Spear). General contact details of provider: http://www.tepper.cmu.edu/ .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.