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Exit with Multiplant Firms

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Author Info
Michael D. Whinston
Abstract

Using an extension of Ghemawat and Nalebuff's (1985) model, I analyze the outcome of industry decline when firms have multiplant operations. The analysis reveals that no natural generalization of their strong empirical prediction, that the larger of two single-plant duopolists exits first, holds in a multiplant setting. The results also highlight a number of factors that affect the pattern of capacity removal during industry decline and lead to a discussion of the strategic implications of firms' plant size choices. In general, the factors determining the pattern of capacity reduction can be quite complex, and prediction in such settings often requires intimate knowledge of industry structure.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 4 (Winter)
Pages: 568-588
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Handle: RePEc:rje:randje:v:19:y:1988:i:winter:p:568-588

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  1. John Sutton, 1996. "Gibrats Legacy," STICERD - Economics of Industry Papers 14, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  2. Gamal Atallah, 2002. "Opportunity Costs, Competition, and Firm Selection," CIRANO Working Papers 2002s-74, CIRANO. [Downloadable!]
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  3. Dilip Abreu & David Pearce, 2003. "A Behavioral Model of Bargaining with Endogenous Types," Cowles Foundation Discussion Papers 1446, Cowles Foundation, Yale University. [Downloadable!]
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  4. Mathias Erlei, 2006. "Small is Successful!?," TUC Working Papers in Economics 0005, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal). [Downloadable!]
  5. Ron Jarmin, 1999. "Government Technical Assistance Programs* And Plant Survival: The Role Of Plant Ownership Type," Working Papers 99-2, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  6. E. Wolfstetter, . "Oligopoly and Industrial Organization," Sonderforschungsbereich 373 1996-39, Humboldt Universitaet Berlin.
  7. Mark Roberts & Shawn Klimek & Timothy Dunne, 2004. "Entrant Experience and Plant Exit," Working Papers 04-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  8. H. Van Kranenburg & F. Palm & G. Pfann, 2002. "Exit and Survival in a Concentrating Industry: The Case of Daily Newspapers in the Netherlands," Review of Industrial Organization, Springer, vol. 21(3), pages 283-303, November. [Downloadable!] (restricted)
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