Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/47597
Authors: 
Neubecker, Leslie
Year of Publication: 
2002
Series/Report no.: 
Tübinger Diskussionsbeiträge 250
Abstract: 
This paper shows that obligations from debt hinder tacit collusion if equity owners are protected by limited liability. In contrast to its advantageous commitment value in short-run competition, leverage reduces profits from infinite interaction. Contrasting uncorrelated shocks with a cyclical demand development, we show that in the first case optimal pricing is anticyclical. With demand cycles, it is anticyclical only if equity holders place a low value on future profits, but procyclical otherwise. In both cases, the cyclicity of prices increases with the debt level. Contrary to traditional wisdom, a lower degree of homogeneity may raise profits of leveraged firms.
Subjects: 
capital structure
dynamic competition
collusion
Preiswettbewerb
Kapitalstruktur
Kollusion
JEL: 
L41
L13
G32
E32
C73
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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