EconAir

  BALDWIN LOCOMOTIVE WORKS:  A HISTORICAL EXAMPLE OF BILATERAL OLIGOPOLY Baldwin, the largest producer of steam locomotives in the nineteenth century, faced problems typical of a dominant company in a bilateral oligopolistic industry.   A highly cyclical, almost unpredictable competitive environment conditioned almost everything that happened at Baldwin .  A high level of business risk followed from sudden, large fluctuations in demand from railroad companies. This meant that Baldwin often had excess capacity with substantial fixed investment. There were few opportunities for economies of scale.  Baldwin also depended on a skilled labor force with firm-specific knowledge and experience that was exposed to sudden and massive layoffs followed by the company’s attempts to rehire the same workers.  It is hard to imagine a more challenging competitive environment.   Baldwin was a large and dominant firm, accounting for approximately one-third of all steam locomotive production.  The buy sid