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Abstract
An attempt is made here to develop an empirical formulation of a modified limit pricing model applied to the US computer industry. The modifications include a short-term discrete-time version of the limit pricing model, estimated on quarterly date adjusted for quality and price changes, where the entry equation is replaced by market penetration and the optimal trajectory is computed by dynamic programming. The optimal price and output trajectories are compared with (a) myopic and static decision rules, (b) alternative profiles calculated. by Brock, and (c) simulated profiles. Such comparisons show empirical plausibility and to a degree, some superiority of the modified limit pricing model over the others.
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