Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263749 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9819
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the feasibility and profitability of predation in a parsimonious infinite-horizon, complete information setting where an incumbent may face an entrant, in which case it needs to decide whether to accommodate or predate it. If the entrant exits, a new entrant is born with positive probability. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, predation with no future entry, and predation with hit-and-run entry. We use the model to study alternative antitrust policies, derive the best rules for these policies, and compare their welfare effects.
Subjects: 
predation
accommodation
entry
legal rules
Markov perfect equilibrium
JEL: 
D43
L41
Document Type: 
Working Paper
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