The Learning Curve,Predation, Antitrust,and Welfare

An economic definition of predation is applied to a dynamic model of duopoly competition with learning curves. It is shown that rational predation occurs in equilibrium, although below-cost pricing is neither a necessary nor a sufficient indicator of predation. A conceptual framework for antitrust analysis of predation shows that a prohibition of predation might help or harm consumer welfare depending on details of market structure, although the informational requirements of fashioning an effective legal rule against harmful predation are formidable.