Applying Predator—Prey Model to Companies Practicing—Undergoing Dumping. Theoretical Basis and Empirical Notes

Abstract

This article explores the potential application of predator-prey theory to understand and model the dynamics of commercially aggressive companies involved in persistent price dumping. Drawing inspiration from ecological systems, where predator-prey interactions govern population dynamics, we adapt the underlying concept to the business realm, specifically focusing on companies engaging in aggressive pricing strategies that negatively impact competitors. Through a formal model inspired by Lotka-Volterra differential equations, we aim to capture the intricate interplay between predatory companies (engaging in not sporadic dumping) and their prey counterparts (those impacted by it). The explorative article concentrates on industries where aggressive pricing strategies, such as dumping, play a pivotal role, i.e. in sectors like steel production, airline services, and e-commerce (alongside insights into industry-specific dynamics and competitive landscapes). It adopts a mixed-methods approach based on a critical analysis of both literature and industry evidence, providing a theoretical and operating model complete with a numerical simulation. The application demonstrates that the dynamic interactions between prey and predator result in oscillating cycles, i.e., a delicate equilibrium and associated fluctuations (depending on the characteristics and assumptions related to aggressiveness and resilience of the two species, the estimation of parameters and growth rates, the institutional response – authorities constraints, intervention, protection, etc.) that arise as prey and predators influence each other’s populations in the shared ecosystem (market). The interdisciplinary nature of the issues provides valuable insights for policymakers, businesses managers, and industry stakeholders when navigating difficult competitive landscapes on the edge of (un)fair play and responsibility. Limitations and future directions of research are provided.