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Competition authorities are particularly vigilant about anti-competitive pricing practices. One of the first models to formalise entry deterrence is the Sylos-Labini model. Define the price
Competition authorities are particularly vigilant about anti-competitive pricing practices. One of the first models to formalise entry deterrence is the Sylos-Labini model. Define the price limit and identify it graphically. Does the firm deviate from its optimal behaviour (without threat of entry)? Is this behaviour costly for the firm? Why does it accept this cost? In this model, the deterrent equilibrium is based on a non-credible threat. Explain and use graphs for each of the above points
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