FINANCIAL PREDATION BY THE WEAK

We examine a Stackelberg game where a financially constrainedleader faces competition from a ‘deep pocket’ follower. We analyzethe consequences of this trade-off between a financial and a strategicadvantage for both the design of financial contracts and market structure.We derive conditions such that given that his competitor behavesas a Stackelberg leader, the follower, by targeting the incentive mechanismof the financial contract between the leader and his investor, canforce the former to exit the market...