Negotiation and Renegotiation of Optimal Financial Contracts under the Threat of Predation
AbstractThis paper examines the effect of renegotiation on the ability of financial contracts between a lender and entrant to deter an incumbent's predation. In the presence of renegotiation, it is more difficult for the entrant to obtain financing and more difficult for the contract to deter predation. Contracts successfully deter predation in some cases, however, even if renegotiation occurs at a stage with symmetric information between the entrant and lender. Giving the entrant (constrained by limited liability) stronger bargaining power vis-a-vis the lender improves the efficiency of the optimal contract but the results concerning renegotiation are unchanged. Copyright 1996 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 44 (1996)
Issue (Month): 3 (September)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
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- Arve, Malin, 2013. "Procurement and Predation: Dynamic Sourcing from Financially Constrained Suppliers," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 441, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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- Marquez, Robert, 2010. "Informed lending as a deterrent to predation," Finance Research Letters, Elsevier, vol. 7(4), pages 193-201, December.
- Emanuele Gerratana & Levent Kockesen, 2012. "Renegotiation-Proof Third-Party Contracts under Asymmetric Information," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1208, Koc University-TUSIAD Economic Research Forum.
- Gans, Joshua S. & King, Stephen P., 2002. "Exclusionary contracts and competition for large buyers," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1363-1381, November.
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