A BEJEAP Topics article.

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.

Submitted: March 10, 2006 · Accepted: March 14, 2007 · Published: May 9, 2007

Recommended Citation

Tarzijan, Jorge Antonio (2007) "Capital Structure and Entry Deterrence with Multiple Incumbents," The B.E. Journal of Economic Analysis & Policy: Vol. 7 : Iss. 1 (Topics), Article 22.
Available at: http://www.bepress.com/bejeap/vol7/iss1/art22