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A Simple Theory of Predation AgEcon
Fumagalli, Chiara; Motta, Massimo.
We propose a simple theory of predatory pricing, based on scale economies and sequential buyers (or markets). The entrant (or prey) needs to reach a critical scale to be successful. The incumbent (or predator) is ready to make losses on earlier buyers so as to deprive the prey of the scale it needs, thus making monopoly profits on later buyers. Several extensions are considered, including markets where scale economies exist because of demand externalities or two-sided market effects, and where markets are characterised by common costs. Conditions under which predation may take place in actual cases are also discussed.
Tipo: Working or Discussion Paper Palavras-chave: Anticompetitive Behaviour; Exclusion; Below-Cost Pricing; Antitrust; Financial Economics; K21; L12; L40.
Ano: 2010 URL: http://purl.umn.edu/59420
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Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion AgEcon
Fumagalli, Chiara; Motta, Massimo; Ronde, Thomas.
This paper studies a model where exclusive dealing (ED) can both promote investment and foreclose a more efficient supplier. While investment promotion is usually regarded as a pro-competitive effect of ED, our paper shows that it may be the very reason why a contract that forecloses a more efficient supplier is signed. Absent the effect on investment, the contract would not be signed and foreclosure would not be a concern. For this reason, considering potential foreclosure and investment promotion in isolation and then summing them up may not be a suitable approach to assess the net effect of ED. The paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defence for ED.
Tipo: Working or Discussion Paper Palavras-chave: Monopolization Practices; Vertical Agreements; Financial Economics; L12; L40; L42.
Ano: 2009 URL: http://purl.umn.edu/56213
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