Entry deterrence through credit denial
Firms in oligopoly can use debt to commit to a strategic position that negatively affects rival firms and improves profitability. In this paper, I show that an incumbent firm can deter entry by using debt to commit to such a low price that an entrant's lender will not finance entry, even if the entrant's expected profit from entry is positive. Empirical evidence shows that concentration and debt are positively related in several industries, indicating that debt may be used to reduce competition.
Year of publication: |
2010
|
---|---|
Authors: | Showalter, Dean |
Published in: |
International Review of Economics & Finance. - Elsevier, ISSN 1059-0560. - Vol. 19.2010, 4, p. 539-554
|
Publisher: |
Elsevier |
Keywords: | Strategic debt Game theory Credit rationing |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
UNIVERSITY STARTUP INTENSITY AND FACULTY QUALITY
Showalter, Dean, (2019)
-
Debt as an Entry Deterrent Under Bertrand Price Competition
Showalter, Dean, (1999)
-
Strategic debt and patent races
Jensen, Richard, (2004)
- More ...