Rationalizable Predatory Pricing

Author: Roth D.

Source: Journal of Economic Theory, Volume 68, Number 2, February 1996 , pp. 380-396(17)

Publisher: Academic Press

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Abstract:

This paper shows that predatory pricing is rationalizable and is in this sense rational even when there is no uncertainty regarding structural parameters such as cost or demand. Predatory pricing is modelled as a war of attrition. All strategy profiles-including all possible lengths of predatory battles-are rationalizable in the extensive form. Despite this, weak restrictions on beliefs combined with rationalizability have drastic implications for the play of the game. Journal of Economic Literature Classification Numbers: C72, C73, L12, L41.

Language: English

Document Type: Research article

Affiliations: Department of Economics, University of Michigan, Ann Arbor, Michigan, 48109:

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