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Managers, debt and industry equilibrium

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  • Nier, Erlend

Abstract

This paper reconsiders the strategic effect of debt under the assumption that quantity choices are made by managers whose objective is to avoid bankruptcy. The basic result is that quantity choices, which are strategic substitutes under profit maximization, may turn into strategic complements under reasonable assumptions on the profit function. The value of delegation, optimal wage contracts, and empirical implications are discussed.

Suggested Citation

  • Nier, Erlend, 1998. "Managers, debt and industry equilibrium," LSE Research Online Documents on Economics 119152, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:119152
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    File URL: http://eprints.lse.ac.uk/119152/
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    References listed on IDEAS

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    8. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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    Cited by:

    1. Frank Schuhmacher, 2001. "Verhandlungssichere Finanzierungsverträge im Dyopol," Schmalenbach Journal of Business Research, Springer, vol. 53(2), pages 127-154, March.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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