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A Critical Analysis of Critical Loss Analysis

SSRN Electronic Journal, 2003
Critical loss analysis is often used to argue that firms with large margins have more to lose from a reduction in sales and hence are less likely to increase prices. This argument ignores the fact that profit-maximizing competitors who do not coordinate their pricing only have large margins if their customers are not very price sensitive. In this paper,
Daniel P. O'Brien, Abraham L. Wickelgren
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