Plant closings and exit behaviour in declining industries

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Abstract

The plant closing and exit strategies of firms operating in a declining industry are examined. A dynamic, game-theoretic model is utilized. The perfectness criterion is used to restrict the set of Nash equilibria. There are two key equilibrium results. First, when firms have the same number of plants, high cost plants close before lower cost plants. Second, a larger firm (i.e. a firm operating more plants) begins closing plants before a smaller firm, as long as cost differences are not large. -Author

Original languageEnglish (US)
Pages (from-to)493-503
Number of pages11
JournalEconomica
Volume55
Issue number220
DOIs
StatePublished - Jan 1 1988

ASJC Scopus subject areas

  • Economics and Econometrics

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