Econometrica Vol. 62 No. 5 1994
The Learning Curve, Market Dominance, and Predatory Pricing
Abstract
Strategic implications of the learning curve hypothesis are analyzed in the context of a price-setting, differentiated duopoly selling to a sequence of heterogeneous buyers with uncertain demands. A unique Markov perfect equilibrium is characterized and sufficient conditions are provided for market dominance to be self-reinforcing. Increasing market dominance implies that learning is privately disadvantageous. Finally, introducing avoidable fixed costs and possible exit into the model yields a new theory of predatory pricing based on the learning curve hypothesis.
- DOI
- 10.2307/2951509
- Volume
- 62
- Issue
- 5
- Pages
- 1115
- Sources
- bibtex:phds-export.bib openalex crossref