Wars of Attrition in Experimental Duopoly Markets
Oligopolists often bear large fixed costs. These fixed costs can change, for example through rising property rents, increased taxes, and renegotiated labor contracts. In this paper, we imagine oligopoly market structures that are identical except for the level of fixed costs. Does this level influence the strategic behavior of firms? Since marginal profits are unaffected by fixed costs, one answer is that there should be no change in behavior. Alternatively, firms may seek more cooperative outputs in order to maintain profits. Enough cooperation can even generate bigger profits. But if fixed ...
(For more, see "View full record.")