The limit pricing model developed in this chapter is an attempt to gain some insight into the optimal pricing strategy for a dominant firm or group of joint profit-maximizing oligopolists facing potential entry into the product market. Early research on this subject was from a static perspective, and, for the most part, concluded that the dominant firm will maximize its present value by either (i) charging the short-run profit-maximizing price and allowing its market share to decline, or (ii) setting price at the limit price thereby precluding all entry. A firm practicing short-run profit maximization would have to continually ignore the reality of entry by other firms induced by its pricing strategy. On the other hand, a firm charging the limit price has to think that its current market share is in fact its long-run optimal market share. Economic intuition suggests that the optimal pricing strategy entails a balancing of current profits and long-run market share. For example, a dominant firm currently charging a high price and earning high current profits is likely sacrificing some future profits through the erosion of its current market share. It is this dependence of the dominant firm's future market share, and thus its profits, on its current pricing strategy that makes this model inherently dynamic.