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Capital Structure and Entry Deterrence with Multiple Incumbents

Author

Listed:
  • Tarzijan Jorge Antonio

    (Universidad Catolica de Chile)

Abstract
This paper uses a two-stage Cournot duopoly model with demand uncertainly to examine the strategic role debt plays in deterring a company from entering when a potential entrant can enter one of several markets. We show that as the number of alternative markets available for entry rises, the incumbents' incentive to use debt as a deterrent falls. Thus, a potential entrant will prefer to have a larger number of alternative markets to enter in order to lower the incumbents' incentive to take strategic actions against it.

Suggested Citation

  • Tarzijan Jorge Antonio, 2007. "Capital Structure and Entry Deterrence with Multiple Incumbents," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-18, May.
    • Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:22
    DOI: 10.2202/1935-1682.1590
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    Cited by:

    1. Meng, Dawen & Tian, Guoqiang, 2013. "Entry-Deterring Nonlinear Pricing with Bounded Rationality," MPRA Paper 57935, University Library of Munich, Germany, revised May 2014.
    2. Kappes, Jan Willem & Merkert, Rico, 2013. "Barriers to entry into European aviation markets revisited: A review and analysis of managerial perceptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 58-69.

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