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Article
Financial Intermediation and Entry-Deterrence
Economic Theory (2003)
  • Neelam Jain
  • Thomas D. Jeitschko, Michigan State University
  • Leonard Mirman
Abstract

n this paper, we analyze the interaction between an incumbent's financial contract with a bank and its product market decisions in the face of a threat of entry, in a dynamic model with asymmetric information. The main results of the paper are: there exists a separating equilibrium with no limit pricing; the low-cost incumbent repays more to the bank in the first period 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.

Disciplines
Publication Date
November, 2003
Citation Information
Neelam Jain, Thomas D. Jeitschko and Leonard Mirman. "Financial Intermediation and Entry-Deterrence" Economic Theory Vol. 22 Iss. 4 (2003)
Available at: http://works.bepress.com/jeitschko/16/