Title: Dynamic Learning and Exit in Competitive Markets
Speaker: Hongju Liu, Assistant Professor, School of Business, University of Connecticut
Time: 1:30-3:00pm, 9th May, 2012
Location: Room 217, New Building of GSM, Peking University
Abstract
This paper presents a model of firms making exit decisions in a competitive industry.
We model the process as the result of learning and selection in a dynamic
game setting. Firms are uncertain about their true capability of competing in the
market. Meanwhile, they are uncertain of the true types of their competitors. Sales
of each time period provide a noisy signal of the capabilities of the competing firms
and the firms use the demand signals to update their belief of themselves as well as
their competitors in Bayesian fashion. Firms strategically decide whether to exit the
industry each period given the learning results and the expectation of the competition
dynamics. We estimate the model using a data set of China’s evolving microwave
oven industry. We also separately evaluate the importance of self-learning, learning-of-
others and competition in driving the exit decisions through simulations.
Welcome to attend!