Financial Contracting, Signal-Jamming, and Entry Deterrence

46 Pages Posted: 29 Aug 2001  

Neelam Jain

City University London

Thomas D. Jeitschko

Michigan State University - Department of Economics

Leonard J. Mirman

University of Virginia - Department of Economics

Date Written: August 27, 2001

Abstract

We study the relationship between financial contracting and entry deterrence when the potential entrant observes the market price but does not observe the financial contract. This leads to the possibility that the entrant and the lender have different beliefs about the incumbent's costs, due to uncertainty in the demand for the good. We show that as a result, the incumbent produces a different level of output in the first period and the probability of entry increases compared to the case when the entrant observes the financial contract.

Keywords: Experimentation, Strategic Experimentation, Signal Dampening, Signal Jamming, Financial Intermediation, Entry Deterrence

JEL Classification: C73, D8, L1

Suggested Citation

Jain, Neelam and Jeitschko, Thomas D. and Mirman, Leonard J., Financial Contracting, Signal-Jamming, and Entry Deterrence (August 27, 2001). Available at SSRN: https://ssrn.com/abstract=281434 or http://dx.doi.org/10.2139/ssrn.281434

Neelam Jain

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

Thomas D. Jeitschko (Contact Author)

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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