Strategic Interdependence: Quasi-Experiment in the Maritime Industry during the 1880s in Japan

Without a sufficiently informative dataset, it would be difficult to explore strategic interdependencies among firms, such as demand estimation. This paper investigates strategic interdependence through a unique historical case of duopoly in the Japanese maritime industry during the 1880s. Yubin Kisen Mitsubishi, led by Iwasaki Yataro, was a monopoly. A new entrant, Kyodo Un'yu, led by Shibusawa Eiichi, offered superior services and implemented a strategy of one-sided fare reductions. Yubin Kisen Mitsubishi delayed in taking countermeasures. This paper regards this delay as a quasi-experiment, and reveals the process by which Kyodo Un'yu gained market share. A simple elasticity calculation shows that a 1% price cut by Kyodo Un'yu resulted in a 10.065% increase in cargo transport demand.