In this research, it is investigated firms' exit behaviors. On the basis of extant literature in economics, strategy, and marketing, it is identified market- and firm-specific factors that influence exit behavior. It is accounted for firms' uncertainty about a market's true attractiveness after entry on the probability of exiting a market. To evaluate exit decisions, it is proposed a Bayesian belief-updating model of learning embedded in a logit model that incorporates market- and firm-specific factors. The estimated evolution of beliefs over time enables to determine whether firms use market information to update their prior beliefs about market attractiveness. It is empirically investigated the market exits of new entrant discount airlines from city-pair markets. The results suggest that a combination of several market and firm factors influences exit behavior. Airlines' prior beliefs about market attractiveness are not necessarily consistent with the market's intrinsic attractiveness, and firms learn about the true market attractiveness over time. It is also provided model comparisons with extant approaches to studying market exit and it is found that the proposed approach provides a better fit and predictive ability.
Learning and exit behavior of new entrant discount airlines from city-pair markets
Journal of Marketing ; 71 , 2 ; 150-168
2007
19 Seiten, 2 Bilder, 5 Tabellen, 65 Quellen
Article (Journal)
English
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