IDEAS home Printed from
   My bibliography  Save this paper

Endogenous Market Structures and Corporate Finance


  • Federico Etro


We characterize the optimal financial structure as a strategic de- vice to optimize the value of a firm competing in a market whose struc- ture is endogenous. Contrary to traditional results based on duopolies and depending on the form of competition, we show the general opti- mality of moderate debt financing whenever positive shocks increase the marginal profitability of strategies that reduce prices, indepen- dently from whether they are strategic susbtitutes or complements. We derive the general formulas for the optimal financial structure un- der Cournot and Bertrand competition with endogenous entry and cost uncertainty and extend the results in many directions.

Suggested Citation

  • Federico Etro, 2009. "Endogenous Market Structures and Corporate Finance," Working Papers 165, University of Milano-Bicocca, Department of Economics, revised Jul 2009.
  • Handle: RePEc:mib:wpaper:165

    Download full text from publisher

    File URL:
    File Function: First version, 2009
    Download Restriction: no

    More about this item


    Financial structure; Debt; Modigliani-Miller theorem; Endogenous entry;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mib:wpaper:165. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Matteo Pelagatti (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.