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Strategic Buyers and Market Entry

Author

Listed:
  • Lisa Bruttel
  • Jochen Gl�ckner
Abstract
This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing. Such prohibitions are usually based on the economic grounds that monopolistic pricing is likely to occur in the long run, causing harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that no competitor will (re-)enter the market in this subsequent phase. Our two experiments indicate that both assumptions are not backed up by actual decision making both of consumers and of competitors. Moreover, we find that consumers use their market power in order to maintain long-run competition.

Suggested Citation

  • Lisa Bruttel & Jochen Gl�ckner, 2009. "Strategic Buyers and Market Entry," TWI Research Paper Series 44, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    • Handle: RePEc:twi:respas:0044
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    References listed on IDEAS

    as
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    Cited by:

    1. Lisa Bruttel, 2014. "Buyer power in large buyer groups?," TWI Research Paper Series 92, Thurgauer Wirtschaftsinstitut, Universität Konstanz.

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    More about this item

    Keywords

    Predatory Pricing; Recoupment; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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