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A Dynamic Model of Predation

Author

Listed:
  • Patrick Rey

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Yossi Spiegel

    (TAU - Tel Aviv University)

  • Ernst Konrad Stahl

    (University of Mannheim = Universität Mannheim)

Abstract

We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving.

Suggested Citation

  • Patrick Rey & Yossi Spiegel & Ernst Konrad Stahl, 2025. "A Dynamic Model of Predation," Post-Print hal-05483810, HAL.
    • Handle: RePEc:hal:journl:hal-05483810
    DOI: 10.1111/1756-2171.70027
    Note: View the original document on HAL open archive server: https://hal.science/hal-05483810v1
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