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Financial Predation by the "Weak"

Author

Listed:
  • 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.

Suggested Citation

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

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    References listed on IDEAS

    as
    1. Michel Poitevin, 1989. "Financial Signalling and the "Deep-Pocket" Argument," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 26-40, Spring.
    2. 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.
    3. Neelam Jain & Thomas Jeitschko & Leonard Mirman, 2005. "Entry deterrence under financial intermediation with private information and hidden contracts," Review of Economic Design, Springer;Society for Economic Design, vol. 9(3), pages 203-225, 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. 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 766-784, August.
    6. 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.
    7. 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.
    8. 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.
    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. 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.
    11. 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.
    12. Levy, David T, 1989. "Predation, Firm-Specific Assets and Diversification," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 227-233, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    predation; financial contracts; Stackelberg game;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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