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Survival of Small Firms: Guerrilla Warfare


  • Chaim Fershtman


Duopolistic interaction between a small firm and a large established firm is considered and compared to guerrilla warfare, The paper investigates a "hit and run" equilibrium in which the small firm enters the market, stays there for several periods, exits, stays out for several periods, and then reenters. Occasionally there may be a price war (or retaliation), but the small firm may also exit voluntarily, thereby avoiding possible confrontation. The amount of time that the small firm stays in the market and the timing of the price wars do not follow any predictable pattern, which is part of the mixed strategies that both firms play in equilibrium. Copyright 1996 The Massachusetts Institute of Technology.

Suggested Citation

  • Chaim Fershtman, 1996. "Survival of Small Firms: Guerrilla Warfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 131-147, March.
  • Handle: RePEc:bla:jemstr:v:5:y:1996:i:1:p:131-147

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    References listed on IDEAS

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