Predatory Pricing in a Oligopolistic Framework

Abstract

In this paper we study the nature of predatory behavior in an oligopolistic framework. We use the long-purse story of financial vulnerability to demonstrate that predatory behavior is less likely to occur in an oligopoly than in a monopoly. We show the nature of the free-rider problem, and illustrate the range of multiple equilibria that may exist in this situation. We also show how small firms may be less likely targets for predatory attacks than their larger, more efficient rivals, examine the model with uncertainty added, and discuss the model’s application to antitrust.