Survival of small firms: Guerrilla warfare

Chaim Fershtman*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)131-147
Number of pages17
JournalJournal of Economics and Management Strategy
Volume5
Issue number1
DOIs
StatePublished - 1996

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