Learning by doing and dominant firm pricing strategy

Abstract

This paper examines the implientions of introducing a learning curve into the Gaskins model of dynamic limit pricing by a dominant firm. It is shown that the possibility of obtaining learning oconomics will induce dominant firms to initially lower prices below what would prevail in the absence of the learning effect. However, the possibility that the price path over time crosses the one that would be obtained in the absence of learning economies cannot be ruled out.