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A "Signal-Jamming" Theory of Predation
Drew Fudenberg and Jean Tirole
The RAND Journal of Economics
Vol. 17, No. 3 (Autumn, 1986), pp. 366-376
Stable URL: http://www.jstor.org/stable/2555717
Page Count: 11
You can always find the topics here!Topics: Predation, Incumbents, Prices, Fixed costs, Predators, Market prices, Predatory pricing, Distribution of profits, Profitable firms, Economic profit
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We propose a new theory of predation based on "signal-jamming." In our model the predator's characteristics are common knowledge, while the entrant is uncertain of his own future profitability. The entrant uses his current profit to decide whether to remain in the market, and the predator preys to "jam" or interfere with this inference problem. Thus, our model differs from those based on"reputation effects," in which the predator preys to signal information about himself.
The RAND Journal of Economics © 1986 RAND Corporation