Hunting unicorns? Experimental evidence on predatory pricing policies

Arbeitspapier

We study the anticompetitive effects of predatory pricing and the efficacy of three policy responses. In a series of experiments where an incumbent and a potential entrant interact, we compare prices, market structures and welfare. Under a laissez-faire regime, the threat of post-entry price cuts discourages entry, and allows incumbents to charge monopoly prices. Current U.S. policy (Brooke Group) does not help. A policy suggested by Baumol (1979) lowers post-exit prices, while Edlin's (2002) proposal reduces pre-entry prices and encourages entry. While both policies show outcomes after entry that are less competitive than under Laissez-Faire, they nevertheless increase consumer welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 258

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Antitrust Law ; Monopoly; Monopolization Strategies ; Oligopoly and Other Imperfect Markets ; Design of Experiments: Laboratory, Individual
• Subject: Predatory pricing ; entry deterrence ; firm strategy ; antitrust law ; experiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Edlin, Aaron S. ; Roux, Catherine ; Schmutzler, Armin ; Thöni, Christian
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2017

Further information

• DOI: doi:10.5167/uzh-138188
• Handle: http://hdl.handle.net/10419/173418
• Last update: 10.03.2025, 11:45 AM CET