Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301298 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11172
Publisher: 
CESifo GmbH, Munich
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.
Subjects: 
predation
accommodation
entry
legal rules
Markov perfect equilibrium
JEL: 
D43
L41
Document Type: 
Working Paper
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