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Oligopolistic equilibrium and financial constraints

  • Carmen Beviá
  • Luis C. Corchón
  • Yosuke Yasuda

In this paper we present a model of oligopoly and financial constraints. We study allocations which are bankruptcy-free (BF) in the sense that no firm can drive another firm to bankruptcy without becoming bankrupt. We show how such allocations can be sustained as an equilibrium of a dynamic game. When there are two firms, all equilibria yield BF allocations. When there are more than two firms, allocations other than BF can be sustained as equilibria but in some cases the set of BF allocations still useful in explaining the shape of equilibrium set.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1110.

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Date of creation: Apr 2011
Date of revision:
Handle: RePEc:cte:werepe:we1110
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  1. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  2. Robert W. Rosenthal & Richard H. Spady, 1989. "Duopoly with Both Ruin and Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 22(4), pages 834-51, November.
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  4. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 27-41.
  5. Burns, Malcolm R, 1986. "Predatory Pricing and Acquisition Cost of Competitors," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 266-96, April.
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  7. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  8. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  9. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
  10. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  11. Giancarlo Spagnolo, 2000. "Stock-Related Compensation and Product-Market Competition," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 22-42, Spring.
  12. Roth, David, 1996. "Rationalizable Predatory Pricing," Journal of Economic Theory, Elsevier, vol. 68(2), pages 380-396, February.
  13. Oscar Couwenberg, 2001. "Survival Rates in Bankruptcy Systems: Overlooking the Evidence," European Journal of Law and Economics, Springer, vol. 12(3), pages 253-273, November.
  14. Kawakami, Toshikazu & Yoshihiro, Yoshida, 1997. "Collusion under financial constraints: Collusion or predation when the discount factor is near one?," Economics Letters, Elsevier, vol. 54(2), pages 175-178, February.
  15. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 1-26.
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