Predation and Its Rate of Return: The Sugar Industry, 1887Ð1914
We show that the price wars following two major entry episodes were predatory. Our proof is twofold: by direct comparison of price to marginal cost, and by construction of a lower bound to predicted competitive price-cost margins that we show to exceed observed margins. Predation occurred only when its relative cost to the dominant firm, the American Sugar Refining Company (ASRC), was small. Its most clear effect was to lower the acquisition price of entrants and small incumbents. It may also have deterred future capacity additions and raised ASRC's share of industry profits. Predation operated by strengthening ASRC's reputation as a willing predator.
Year of publication: |
2006
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Authors: | Genesove, David ; Mullin, Wallace |
Published in: |
RAND Journal of Economics. - The RAND Corporation, ISSN 0741-6261. - Vol. 37.2006, 1, p. 47-69
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Publisher: |
The RAND Corporation |
Saved in:
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