Capital Structure and Entry Deterrence with Multiple Incumbents

Tarzijan Jorge Antonio ()
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Tarzijan Jorge Antonio: Universidad Catolica de Chile

The B.E. Journal of Economic Analysis & Policy, 2007, vol. 7, issue 1, 18

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.

Keywords: entry; strategic interaction; multiple incumbents (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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DOI: 10.2202/1935-1682.1590

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