Jain, Neelam Jeitschko, Thomas D. Mirman, Leonard J.
Year of Publication:
Tinbergen Institute Discussion Paper 01-037/2
In this paper, we analyze the interaction between an incumbent firm's financial contract with abank and its product market decisions in the face of the threat of entry, in a dynamic model.The main results of the paper are: there exists a separating equilibrium with no limit pricing; thelow-cost incumbent repays more to the bank in the first period, due to the threat of entry; andthere are parameter values for which the bank makes more profits with the threat of entry thanwithout.
Entry Intermediation Limit Pricing Banking information