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Critics of the simple limit pricing strategy

Critics of the straightforward limit pricing strategy argue about that: (w) sunk costs are not important in deterring entry. (x) for limit pricing to work, there should be a credible threat to keep old output levels. (y) this is rational to expect the incumbent firm to keep old output levels after entry of a competitor. (z) a binding agreement to continue to keep old output levels will lessen the likelihood of a limit pricing strategy to be successful.

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