Financial Intermediation and Entry Deterrence

24 Pages Posted: 14 Jan 2000  

Neelam Jain

City University London

Thomas D. Jeitschko

Michigan State University - Department of Economics

Leonard J. Mirman

University of Virginia - Department of Economics

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Abstract

In this paper, we analyze the interaction between an incumbent firm's financial contract with a bank 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; there are conditions under which the low-cost incumbent repays more to the bank, due to the threat of entry; and there are parameter values for which the bank makes more profits with the threat of entry than without.

JEL Classification: D4, L1, G3

Suggested Citation

Jain, Neelam and Jeitschko, Thomas D. and Mirman, Leonard J., Financial Intermediation and Entry Deterrence. Available at SSRN: https://ssrn.com/abstract=199308 or http://dx.doi.org/10.2139/ssrn.199308

Neelam Jain (Contact Author)

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

Thomas D. Jeitschko

Michigan State University - Department of Economics ( email )

110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~jeitschk/

Leonard J. Mirman

University of Virginia - Department of Economics ( email )

1818 Winston Rd
Charlottesville, VA
United States

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