Estimating a War of Attrition: The Case of the US Movie Theater Industry

Yuya Takahashi

American Economic Review, 2015, vol. 105, issue 7, 2204-41

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. (JEL D92, L11, L82, N72)

JEL-codes: D92 L11 L82 N72 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20110701
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Citations: View citations in EconPapers (12)

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