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Financial Predation by the "Weak"

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  • Spiros Bougheas

    (School of Economics, University of Nottingham, U.K.)

  • Saksit Thananittayaudom

    (Faculty of Economics, Chulalongkorn University, Thailand)

Abstract

We consider a Stackelberg game, where a financially constrained leader competes with a "deep pocket" follower, and analyze the trade-off between a financial and a strategic advantage for both the design of financial contracts and market structure.

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Bibliographic Info

Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

Volume (Year): 5 (2006)
Issue (Month): 3 (December)
Pages: 231-244

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Handle: RePEc:ijb:journl:v:5:y:2006:i:3:p:231-244

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Postal: 100 Wenhwa Road, Seatwen, Taichung
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Related research

Keywords: predation; financial contracts; Stackelberg game;

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References

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  1. Poitevin, M., 1987. "Financial Signalling and the "Deep Pocket" Argument," Cahiers de recherche 8754, Universite de Montreal, Departement de sciences economiques.
  2. Giacinta Cestone & Lucy White, 2003. "Anticompetitive Financial Contracting: The Design of Financial Claims," Journal of Finance, American Finance Association, vol. 58(5), pages 2109-2142, October.
  3. Dean Showalter, 1999. "Debt as an Entry Deterrent Under Bertrand Price Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 1069-1081, August.
  4. Lawarree, Jacques P. & Van Audenrode, Marc A., 1996. "Optimal Contract, Imperfect Output Observation, and Limited Liability," Journal of Economic Theory, Elsevier, vol. 71(2), pages 514-531, November.
  5. Lambrecht, Bart M, 2001. "The Impact of Debt Financing on Entry and Exit in a Duopoly," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 765-804.
  6. Carr, Jack L & Mathewson, G Frank, 1988. "Unlimited Liability as a Barrier to Entry," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 766-84, August.
  7. Wanzenried, Gabrielle, 2003. "Capital structure decisions and output market competition under demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 171-200, February.
  8. Robert Gertner & Robert Gibbons & David Scharfstein, 1988. "Simultaneous Signalling to the Capital and Product Markets," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 173-190, Summer.
  9. Faure-Grimaud, Antoine, 2000. "Product market competition and optimal debt contracts: The limited liability effect revisited," European Economic Review, Elsevier, vol. 44(10), pages 1823-1840, December.
  10. Neelam Jain & Thomas Jeitschko & Leonard Mirman, 2005. "Entry deterrence under financial intermediation with private information and hidden contracts," Review of Economic Design, Springer, vol. 9(3), pages 203-225, 08.
  11. Jean-Pierre Benoit, 1984. "Financially Constrained Entry in a Game with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 490-499, Winter.
  12. Levy, David T, 1989. "Predation, Firm-Specific Assets and Diversification," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 227-33, December.
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