We examine why different renegotiation processes can lead to opposite results regarding the commitment value of third-party contracts in the presence of asymmetric information. Our main result is that a contract loses all strategic value if renegotiation is allowed during the production stage...

This article provides a formal representation of Telser's (1966) "deep-pocket" argument by considering a model in which the entrant's and the incumbent's financial structures are endogenous. The entrant's financial vulnerability may be explained by informational asymmetries in financial markets....