Estimating a War of Attrition: The Case of the US Movie Theater Industry
American Economic Review
vol. 105,
no. 7, July 2015
(pp. 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)Citation
Takahashi, Yuya. 2015. "Estimating a War of Attrition: The Case of the US Movie Theater Industry." American Economic Review, 105 (7): 2204-41. DOI: 10.1257/aer.20110701Additional Materials
JEL Classification
- D25 Intertemporal Firm Choice, Investment, Capacity, and Financing
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L82 Entertainment; Media
- N72 Economic History: Transport, Trade, Energy, Technology, and Other Services: U.S.; Canada: 1913-