We gratefully thank Glenn Carroll for his helpful comments. This paper is really the result of * a cooperative effort. For the sake of variety, and to neutralize the consequences of the current citation analysis practices, we have the routine to randomize the order of the authors' names over our joint papers. ABSTRACT This paper merges two theoretical perspectives in a mathematical game model: industrial organization on the one hand, which basically is the economic theory of market competition

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... nd firm strategies, and organizational ecology on the other, which is a major sociological tradition that studies the evolution of organizational populations. The merger is instrumental in analyzing a key question in organization studies: what is the role of flexibility, inertia and efficiency in facilitating firm performance in a selection environment, in terms of both profitability and survival? Particularly, we argue that game theory can offer a mathematical model of organizational ecology. Such a game-theoretic model reveals that an inert firm may push a flexible rival from the market, even if the inert market leader faces a cost disadvantage. Moreover, this may happen in a munificent environment. That is, cut-throat rivalry can be the result of strategic competition only -being facilitated by organizational inertia. This paper operationalizes relative inertia by modeling managerial resistance against downsizing. The model clearly supports the key claim of organizational ecology that relative inertia facilitates rather than impedes survival chances.