Find rate of price decreases that maximizes present value of economic profits e. Learning by Doing a. Reduce future costs by expanding current q above profit maximizing level. If learning by doing is extremely fast or extremely slow, advantage to incumbent is reduced. E. Raising Rival's Costs 1.
Profitability depends on costs of raising rivals costs.
Always worth more to monopoly to keep entrant out than it is for firms to enter. Incumbent always willing to pay more for a scarce resource than a potential entrant. Welfare implications are ambiguous a. cannot tell if action is strategic behavior or competitive behavior 2. Cooperative Strategic Behavior A. Practices that Facilitate Collusion 1. Uniform Prices a. easier to detect cheating b. Robinson-Patman Act requires equal prices for customers who are competitors 2.