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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Hunting unicorns? Experimental evidence on predatory pricing policies |
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| Institution | University of Zurich |
| Series Name | Working paper series / Department of Economics |
| Number | 258 |
| ISSN | 1664-7041 |
| Number of Pages | 30 |
| Date | 2017 |
| Abstract Text | We study the anticompetitive effects of predatory pricing and the efficacy of three policy responses. In a series of experiments where an incumbent and a potential entrant interact, we compare prices, market structures and welfare. Under a laissez-faire regime, the threat of post-entry price cuts discourages entry, and allows incumbents to charge monopoly prices. Current U.S. policy (Brooke Group) does not help. A policy suggested by Baumol (1979) lowers post-exit prices, while Edlin’s (2002) proposal reduces pre-entry prices and encourages entry. While both policies show outcomes after entry that are less competitive than under Laissez-Faire, they nevertheless increase consumer welfare. |
| Official URL | http://www.econ.uzh.ch/static/wp/econwp258.pdf |
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| Keywords | Predatory pricing, entry deterrence, firm strategy, antitrust law, experiment, Verdrängungswettbewerb, Markteintrittsstrategie, Kartellrecht, Wettbewerbspolitik, Laissez-faire, Konsumentenrente, Experiment |