Tag Archives: Profit

Three factors determine which alternative will yield a dominant firm the greatest present discounted value. The first factor is the difference between the limit profit the firm will earn if it sets a low price and the larger short – … Continue reading →

The static model of limit pricing ignores the fact that entry is a process that takes time. When we take account of the time needed to bring new capacity to the marketplace, we highlight an important element in the dominant … Continue reading →

In fringe firms can increase their output rapidly and take market share away from the dominant firm quickly, the dominant firm the gain little by setting a high price. High short – run profits will evaporate quickly, as will market … Continue reading →