The strategic use of debt reconsidered

Marco Haan and Linda A. Toolsema

International Journal of Industrial Organization, 2008, vol. 26, issue 2, 616-624

Abstract: We consider a two-stage differentiated goods duopoly model with demand uncertainty linking firms' capital structure choice to their output market decisions. Using a numerical analysis, we study how the equilibrium of the model is affected by demand volatility and the substitutability between products. In doing so, we correct a mistake in earlier papers in this literature. Most importantly, we find that the equilibrium debt level decreases as demand becomes more volatile.

Date: 2008
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Citations: View citations in EconPapers (7)

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Working Paper: The strategic use of debt reconsidered (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:2:p:616-624

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