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Cost-Raising Strategies

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  • Salop, Steven C
  • Scheffman, David T

Abstract

This paper studies a variety of strategies by which firms could disadvantage rivals by raising their costs. In this paper, the authors show that strategies designed to raise r ivals' costs have a number of advantages over predatory pricing: they are credible; do not necessarily require the victim to exit; and do not necessarily require the existence of classical market power. The paper sets up a general model; proves a number of general results; an d then applies the model to specific strategies involving "overbuyin g" inputs and vertical integration. Copyright 1987 by Blackwell Publishing Ltd.

Suggested Citation

  • Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    • Handle: RePEc:bla:jindec:v:36:y:1987:i:1:p:19-34
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