Estimating a War of Attrition: The Case of the U.S. Movie Theater Industry
This paper provides a tractable empirical framework to analyze firm behavior in a dynamic oligopoly when demand is declining over time. I modify Fudenberg and Tirole (1986).s model of exit in a duopoly with incomplete information to a model that can be used in an oligopoly, and combine this with an auxiliary entry model to address the initial conditions problem. I estimate this model with panel data on the U.S. movie theater industry from 1949 to 1955, using variations in TV diffusion rates across households, market structure before the exit game starts, and other market characteristics to identify the parameters in the theaterâ€™s payoff function and the distribution of unobservable fixed costs. Using the estimated model, I measure strategic delays in the exit process due to oligopolistic competition and incomplete information. The delay in exit that arises from strategic interaction is 2.7 years on average. Out of these years, 3.7% of this delay is accounted for by incomplete information, while the remaining 96.3% is explained by oligopolistic competition.
|Date of creation:||17 Oct 2013|
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany|
Web page: http://www.sfbtr15.de/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007.
"Simple estimators for the parameters of discrete dynamic games (with entry/exit examples),"
RAND Journal of Economics,
RAND Corporation, vol. 38(2), pages 373-399, 06.
- Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples)," Harvard Institute of Economic Research Working Papers 2036, Harvard - Institute of Economic Research.
- Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Samples)," NBER Working Papers 10506, National Bureau of Economic Research, Inc.
- Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
- Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications 99-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Peter Arcidiacono & Patrick J. Bayer & Jason R. Blevins & Paul Ellickson, 2010. "Estimation of Dynamic Discrete Choice Models in Continuous Time," Working Papers 10-49, Duke University, Department of Economics.
- Paul Ellickson & Patrick Bayer & Jason Blevins & Peter Arcidiacono, 2010. "Estimation of Dynamic Discrete Choice Models in Continuous Time," 2010 Meeting Papers 70, Society for Economic Dynamics.
- Mary E. Deily, 1991. "Exit Strategies and Plant-Closing Decisions: The Case of Steel," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 250-263, Summer.
- Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, 09.
- Mireia Jofre-Bonet & Martin Pesendorfer, 2001. "Estimation of a Dynamic Auction Game," NBER Working Papers 8626, National Bureau of Economic Research, Inc.
- Allan Collard-Wexler, 2006. "Demand Fluctuations and Plant Turnover in the Ready-Mix Concrete Industry," Working Papers 06-25, New York University, Leonard N. Stern School of Business, Department of Economics.
- Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
- Victor Aguirregabiria & Pedro mira, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers tecipa-297, University of Toronto, Department of Economics.
- Matthew Gentzkow & Jesse M. Shapiro, 2008. "Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 279-323.
- Marvin B. Lieberman, 1990. "Exit from Declining Industries: "Shakeout" or "Stakeout"?," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 538-554, Winter.
- Stephen P. Ryan, 2012. "The Costs of Environmental Regulation in a Concentrated Industry," Econometrica, Econometric Society, vol. 80(3), pages 1019-1061, 05.
- Stephen Ryan, 2005. "The Costs of Environmental Regulation in a Concentrated Industry," Working Papers 0510, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Stephen Ryan, 2006. "The Costs of Environmental Regulation in a Concentrated Industry," 2006 Meeting Papers 9, Society for Economic Dynamics.
- Steven Klepper & Kenneth L. Simons, 2000. "The Making of an Oligopoly: Firm Survival and Technological Change in the Evolution of the U.S. Tire Industry," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 728-760, August.
- Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
- Pankaj Ghemawat & Barry Nalebuff, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 167-186.
- Nishiwaki, Masato, 2008. "Horizontal Mergers and Divestment Dynamics in a Sunset Industry," MPRA Paper 21812, University Library of Munich, Germany.
- Przemysław Jeziorski, 2014. "Estimation of cost efficiencies from mergers: application to US radio," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 816-846, December.
- Baden-Fuller, Charles W F, 1989. "Exit from Declining Industries and the Case of Steel Castings," Economic Journal, Royal Economic Society, vol. 99(398), pages 949-961, December.
- Martin Pesendorfer & Philipp Schmidt-Dengler, 2008. "Asymptotic Least Squares Estimators for Dynamic Games -super-1," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 901-928.
- Davis, Peter, 2005. "The Effect of Local Competition on Admission Prices in the U.S. Motion Picture Exhibition Market," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 677-708, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:424. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.