Product Characteristics and the Effectiveness of Dow’s Countermeasure for Predatory Pricing

Autor: Jerry L. Taylor, Jason E. Taylor, Mona Moldoveanu
Rok vydání: 2013
Předmět:
Zdroj: International Journal of the Economics of Business. 20:1-14
ISSN: 1466-1829
1357-1516
DOI: 10.1080/13571516.2012.750043
Popis: Predatory pricing theoretically occurs when a firm cuts its price below cost with the intention of driving competitors out of the market so that the predatory firm can then act as a monopolist. Herbert H. Dow, founder of the Dow Chemical Company, saw his company face such a predator, the German Bromkonvention, in the American market for bromine in the early 20th century. Dow responded with an ingenious gambit – he secretly purchased the low cost German bromine and then repackaged and resold it on the European market at a profit. This case has been offered as evidence that predatory pricing is unlikely to exist in the real world, since the prey can simply do what Dow did. This paper explores the product and market attributes that must be present in order for the Dow Gambit, or variations of it, to be used as a successful countermeasure for predatory pricing. We examine product and market attributes in 15 other well-known cases of predatory pricing to gain some empirical insight. In only two of the...
Databáze: OpenAIRE
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