Entry deterrence through credit denial |
| |
| Authors: | Dean Showalter |
| |
| Institution: | 1. School of Mechanical and Automotive Engineering, Shanghai University of Engineering Science, China;1. School of Management, Hefei University of Technology, Hefei, Box 270, Hefei 230009, Anhui, PR China;2. Key Laboratory of Process Optimization and Intelligent Decision-making, Ministry of Education, Hefei 230009, Anhui, PR China;3. Manchester Business School, The University of Manchester, Manchester M15 6PB, UK |
| |
| Abstract: | Firms in oligopoly can use debt to commit to a strategic position that negatively affects rival firms and improves profitability. In this paper, I show that an incumbent firm can deter entry by using debt to commit to such a low price that an entrant's lender will not finance entry, even if the entrant's expected profit from entry is positive. Empirical evidence shows that concentration and debt are positively related in several industries, indicating that debt may be used to reduce competition. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
