Strategic financial signalling
We Present a Model of an Entry Game in Which Both Financial and Output Markets Are Characterized by the Presence of Asymmetric Information. We Argue That a Firm's Financial Policy May Serve As a Common Signal in Both Markets. a Monopoly Is Threatened by Entry. the Profitability of Entry to the Entrant Critically Depends on the Cost Level of the Incubent. We Suppose That the Entrants Wishes to Enter the Market If and Only If the Incubent Has High Cost. But the Entrant Cannot Observe the Incubent's Cost Level Directly, and Is Therefore Uncertain of Whether the Incubent Is a Low Or High Cost Type. All Firms Have to Finance a Fixed Cost of Production At the Beginning of the Period. a Low Cost Incubent Would Like to Credibly Reveal Its Private Information to Financiers to Obtain Financial Prices That Reflect Its Quality. Simultaneously It Would Like to Signal Its Cost to the Entrant to Deter Its Entry. We Suggest That Financial Markets Structure Acts As a Common Signal in Financial Markets Allow the Low Cost Incubent to Use Its Financial Structure to Signal Its Type and Deter Entry.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:8:y:1990:i:4:p:499-518. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.