Limit Pricing Case Study
Historically, there have been substantial costs of entry into the steel industry. The technology favors vertical integration at least from the extraction of iron through smelting, refining, rolling, and the production of finished steel products such as steel plate and bars. Fully integrated entry requires a substantial investment. Because such entry is risky, the cost financial capital will be higher for an entrant than a going concern. This will place entrants at a cost disadvantage compared with operating firms. Further, entry into the steel industry involves large sunk costs: there is not much one can do with a steel mill except produce steel. Read more…
