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Entry deterrence under financial intermediation with private information and hidden contracts

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Author Info

  • Neelam Jain

    ()

  • Thomas Jeitschko

    ()

  • Leonard Mirman

    ()

Abstract

We study how financial intermediation affects market entry when an incumbent monopolist enters into non-public, short-term contracts for outside funds. Financial intermediation serves as a commitment device to avoid costly signalling, but at the same time leads to strategic experimentation by the bank. Without public commitment to the financial contract, signal-jamming affects the bank's strategic experiment. Unlike the previous literature on signalling and signal-jamming in entry deterrence in which entry is unaffected or its change indeterminate, the altered strategic experiment has the effect of increasing the amount of entry to the market. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s10058-005-0128-8
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Bibliographic Info

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 9 (2005)
Issue (Month): 3 (08)
Pages: 203-225

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Handle: RePEc:spr:reecde:v:9:y:2005:i:3:p:203-225

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Web page: http://link.springer.de/link/service/journals/10058/index.htm

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Related research

Keywords: Strategic experimentation; signal dampening; signal jamming; financial intermediation; entry deterrence;

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Cited by:
  1. Spiros Bougheas & Saksit Thananittayaudom, 2006. "Financial Predation by the "Weak"," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 5(3), pages 231-244, December.
  2. Neelam Jain & Thomas D. Jeitschko & Leonard J. Mirman, 2003. "Entry Deterrence under Agency Constraints," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 2(3), pages 179-195, December.
  3. Neelam Jain & Leonard Mirman, 2011. "Lender learning and entry under general demand uncertainty," Review of Economic Design, Springer, vol. 15(2), pages 163-175, June.

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