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.

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Year of publication:	1987-12-01
Authors:	Berck, Peter ; Perloff, Jeffrey M
Institutions:	Department of Agricultural and Resource Economics, University of California-Berkeley
Subject:	competition \| industry \| marketing \| mathematical models

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Extent:	application/pdf
Series:	Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Department of Agricultural and Resource Economics, UCB
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010537449