Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155534
Authors: 
Marjit, Sugata
Mukherjee, Arijit
Yang, Lei
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6292
Abstract: 
We study the implications of credit constraints for the sustainability of product market collusion in a bank-financed oligopoly in which firms face an imperfect credit market. We consider two situations, without and with credit rationing, i.e., with a binding credit limit. When there is credit rationing, a moderately higher cost of external financing may affect the degree of collusion, but a substantial increase keeps it unaffected relative to the no-constraint case. A permanent adverse demand shock in this setup does not affect the possibility of collusion, but may aggravate financing constraints and eventually lead to collusion. We consider both Cournot and Bertrand models, and the results are qualitatively the same.
Subjects: 
collusion
credit market
debt-equity
JEL: 
D21
D43
G21
Document Type: 
Working Paper

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