Competition and inter-firm credit: Theory and evidence from firm-level data in Indonesia
AbstractUsing firm-level data we investigate the relationship between trade credit and suppliers' market structure and find a [intersection]-shaped relationship between competition and trade credit, with a discontinuous increase in credit provision between monopoly and duopoly. This "big jump" arises because monopolists are more likely to not offer any trade credit than firms in competitive environments. Our model exploits the fundamentally different nature between cash and trade credit sales, arguing that firms are unable to commit ex ante to a trade credit price. We show that monopolists will often sell only on cash, while credit is always provided in competitive environments.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 93 (2010)
Issue (Month): 1 (September)
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Trade credit Market structure Competition Indonesia;
Other versions of this item:
- Kyle Hyndman & Giovanni Serio, 2007. "Competition and Inter-Firm Credit: Theory and Evidence from Firm-level Data in Indonesia," Departmental Working Papers 0702, Southern Methodist University, Department of Economics.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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