A Theory of Exit in Duopoly¶
Fudenberg, D., & Tirole, J. (1986). A Theory of Exit in Duopoly. Econometrica, 54(4), 943-960.
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Primes¶
- War Of Attrition
- In industrial organization, predatory pricing, advertising wars, and capacity wars among rivals are wars of attrition over which firm exits first, with the prediction that prices stay below cost for the duration and the winner does not recoup losses in proportion to the cost paid.
This sourceModels duopoly exit as a war of attrition, deriving below-cost pricing for the contest's duration and the deeper-pocketed firm's near-certain survival under asymmetric finances.
- In industrial organization, predatory pricing, advertising wars, and capacity wars among rivals are wars of attrition over which firm exits first, with the prediction that prices stay below cost for the duration and the winner does not recoup losses in proportion to the cost paid.
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