Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Predation and its rate of return: the sugar industry, 1887–1914

Predation and its rate of return: the sugar industry, 1887–1914 We show that the price wars following two major entry episodes were predatory. Our proof is twofold: by direct comparison of price to marginal cost, and by construction of a lower bound to predicted competitive price‐cost margins that we show to exceed observed margins. Predation occurred only when its relative cost to the dominant firm, the American Sugar Refining Company (ASRC), was small. Its most clear effect was to lower the acquisition price of entrants and small incumbents. It may also have deterred future capacity additions and raised ASRC's share of industry profits. Predation operated by strengthening ASRC's reputation as a willing predator. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Rand Journal of Economics Wiley

Predation and its rate of return: the sugar industry, 1887–1914

Loading next page...
 
/lp/wiley/predation-and-its-rate-of-return-the-sugar-industry-1887-1914-1Ta4O90nrI

References (30)

Publisher
Wiley
Copyright
Copyright © 2006 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0741-6261
eISSN
1756-2171
DOI
10.1111/j.1756-2171.2006.tb00003.x
Publisher site
See Article on Publisher Site

Abstract

We show that the price wars following two major entry episodes were predatory. Our proof is twofold: by direct comparison of price to marginal cost, and by construction of a lower bound to predicted competitive price‐cost margins that we show to exceed observed margins. Predation occurred only when its relative cost to the dominant firm, the American Sugar Refining Company (ASRC), was small. Its most clear effect was to lower the acquisition price of entrants and small incumbents. It may also have deterred future capacity additions and raised ASRC's share of industry profits. Predation operated by strengthening ASRC's reputation as a willing predator.

Journal

The Rand Journal of EconomicsWiley

Published: Mar 1, 2006

There are no references for this article.