A low-cost foreign firm lowers its initially high price--dumping if necessary--until it drives the higher cost domestic firms out of business,whereupon it raises its price. At no time, however, does the foreign firm predate (price below its marginal cost). Tariffs, quotas, and other policies...

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...