The dynamic annihilation of a rational competitive fringe by a low-cost dominant firm

A low-cost dominant firm will drive all competitive fringe firms out of the market if all firms have rational expectations; however, the dominant firm will not predate (price below marginal cost). Since a dominant firm will not drive out fringe firms if they have myopic expectations, it may be in the dominant firm’s best interests to inform the fringe. The effects of governmental intervention on the optimal path and welfare are presented.


Issue Date:
1987-12
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/43636
Total Pages:
33
Series Statement:
CUDARE Working Paper
383R




 Record created 2017-04-01, last modified 2017-08-25

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