WAR OF ATTRITION: EVIDENCE FROM A LABORATORY EXPERIMENT ON MARKET EXIT |
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| Authors: | RYAN OPREA BART J WILSON ARTHUR ZILLANTE |
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| Institution: | 1. Oprea: Associate Professor, Department of Economics, University of California—Santa Cruz, Santa Cruz, CA 95064. Phone 1‐604‐822‐2408, Fax 1‐604‐822‐5915, E‐mail roprea@ucsc.edu;2. Wilson: Donald P. Kennedy Endowed Chair of Economics and Law, Economic Science Institute, Chapman University, Orange, CA 92866. Phone 1‐714‐628‐7306, Fax 1‐714‐628‐2881, E‐mail bartwilson@gmail.com;3. Zillante: Associate Professor, Department of Economics, University of North Carolina Charlotte, Charlotte, NC 28223. Phone 1‐704‐687‐7589, Fax 1‐704‐687‐1384, E‐mail artie.zillante@uncc.edu |
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| Abstract: | We report an experiment designed to study whether inefficient firms are systematically driven from overcrowded markets. Our data set includes a series of 3,800 wars of attrition of a type modeled by Fudenberg and Tirole in 1986. We find that exit tends to be efficient and exit times conform surprisingly well to point predictions of the model. Moreover, subjects respond similarly to implementations framed in terms of losses as they do to those framed in terms of gains. (JEL D21, L11, C92) |
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