Survival of Small Firms: Guerrilla Warfare

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.     

A Note on Multi-Issue Two-Sided Bargaining: Bilateral Procedures

This note considers a two-sided multi-issue bargaining problem in which players that belong to the same “side” may have conflicting priorities regarding the different negotiated issues. The note examines different bilateral bargaining procedures and shows the different equilibrium settlements that they yield. In particular the note examines the possibility that group heterogeneity (conflicting priorities) may be exploited in order to gain a better settlement. The different potential outcomes that are implied by the different procedures explain why we often observe such intense negotiation over bargaining procedures. Moreover, the conflict over procedure can be substantial, among parties with common interest as well as between opposing players. Journal of Economic Literature Classification Number: C7.