In the Milgrom and Roberts model the predatory pricing is not profitable :Select one:a.in the first period of the game.b.in case of cooperation.c.in case of perfect information.d.in case of collusion.e.in case of asymmetric information.
Question
In the Milgrom and Roberts model the predatory pricing is not profitable :Select one:a.in the first period of the game.b.in case of cooperation.c.in case of perfect information.d.in case of collusion.e.in case of asymmetric information.
Solution 1
In the Milgrom and Roberts model, predatory pricing is not profitable in case of perfect information. This is because in a scenario of perfect information, all firms have access to the same information about market conditions, costs, and consumer behavior. This makes it difficult for any one firm to gain a competitive advantage through predatory pricing. Predatory pricing involves setting prices low with the intention of driving competitors out of the market. However, with perfect information, competitors would be aware of this strategy and could respond in kind, leading to a price war that could harm all firms involved. Therefore, predatory pricing is not profitable in case of perfect information.
Solution 2
In the Milgrom and Roberts model, predatory pricing is not profitable in case of perfect information. This is because in a scenario of perfect information, all firms in the market are fully aware of each other's costs and demand functions. Therefore, a firm cannot profitably set a price below its cost with the expectation that it will later recoup its losses when other firms exit the market, because other firms know this strategy and will not exit.
Solution 3
In the Milgrom and Roberts model, predatory pricing is not profitable in case of perfect information.
Here's why:
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In the Milgrom and Roberts model, firms are assumed to have perfect information about each other's costs and demand functions. This means that each firm knows exactly how the other firms will react to any price change.
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Predatory pricing involves setting prices very low in order to drive competitors out of the market. However, in a situation of perfect information, competitors would know that the low price is temporary and that it is not profitable for the predator in the long run.
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Therefore, competitors would not exit the market, but instead, they would wait out the period of low prices.
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As a result, the predator would not be able to recoup its losses from the period of low prices, making predatory pricing unprofitable.
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Therefore, in the Milgrom and Roberts model, predatory pricing is not profitable in case of perfect information.
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