American Economic Review Vol. 105 No. 7 2015
Estimating a War of Attrition: The Case of the US Movie Theater Industry
Abstract
This paper empirically studies firm's strategic exit decisions in an environment where demand is declining. Specifically, I quantify the extent to which the exit process generated by firms' strategic interactions deviates from the outcome that maximizes industry profits. I develop and estimate a dynamic exit game using data from the US movie theater industry in the 1950s, when the industry faced demand declines. Using the estimated model, I quantify the magnitude of strategic delays and find that strategic interactions cause an average delay of exit of 2.7 years. I calculate the relative importance of several components of these strategic delays.
- DOI
- 10.1257/aer.20110701
- Volume
- 105
- Issue
- 7
- Pages
- 2204-2241
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref