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Market Performance under Dynamic Limit Pricing
Posted by Bowo84 on Jan 24, 2010 in Business
If entry costs are sufficiently small, the monopolist would have to expand output greatly to prevent entry. In this case, the most profitable thing for the dominant firm to do is to set a higher price and give up market share. Eventually, the market will be supplied by several firms of roughly equal size. Such [...]
Dynamic Limit Pricing (II)
Posted by Bowo84 on Jan 10, 2010 in Business
In fringe firms can increase their output rapidly and take market share away from the dominant firm quickly, the dominant firm the gain little by setting a high price. High short – run profits will evaporate quickly, as will market share. When fringe firms can expand rapidly, a dominant firm is more likely to hold [...]
