XML

Seoul Journal of Economics - Vol. 12 , No. 3
[Paper List] [Go to Volume List]

[ Article ]
Seoul Journal of Economics - Vol. 12, No. 3, pp. 295-305
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 1999
Received Jan 1998 Revised May 1999

Debt Financing with Limited Liability and Quantity Competition
Krishnendu Ghosh Dastidar
Associate Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi 110067, INDIA, Tel: +91-11-6107676 (Ext. 2448), Fax: +91-11-6865886 (kgd@jnuniv.ernet.in)

JEL Classification: L13

Abstract

In this paper we extend some results of Brander and Lewis (1986). In particular, we show that their main theorem, as it is stated, is not true. We provide the correct and extended version of that result and also discuss how this approach can be used to probe into some well known Industrial Organisation results.

Acknowledgments

I am indebted to Anjan Mukherji and Kunal Sengupta for this paper. Comments by two referees of this journal were extremely helpful. Ananya Ghosh Dastidar and Dipankar Sengupta were a great help while I was revising the paper.

References
1. Brander, J., and Lewis, T. “Oligopoly and Financial Structure: The Limited Liability Effect.” American Economic Review 76 (1986): 956-970.
2. Bulow, J., Geanakoplos, J., and Klemperer, P. “Multimarket Oligopoly: Strategic Substitutes and Complements.” Journal of Political Economy 93 (1985): 488-511.
3. Campos, J. “Capital Structure and Product Market Interaction: The Limited Liability Effect.” Mimeograph, Madrid 5. 28014, Spain: C/Casado del Alisal, CEMFI, 1995.
4. Dastidar, K. G. “On Some Aspects of Oligopolistic Behaviour: A Game Theoretic Analysis.” Unpublished PhD Dissertation. New Delhi 110067, INDIA: Jawaharlal Nehru University, School of Social Sciences, CESP, 1993.
5. Dastidar, K. G. “Oligopoly and Financial Structure Revisited.” Working Paper No. 2/98. New Delhi 110067, INDIA: Jawaharlal Nehru University, School of Social Sciences, CESP, 1998.
6. Dastidar, K. G. and Sengupta, K. “On Some Implications of Debt Financing with Limited Liability.” Keio Economic Studies 35 (1998): 45-65.
7. Dixit, A. “The Role of Investment in Entry Deterrence.” Economic Journal 90 (1980): 95-106.
8. Glazer, J. “The Strategic Effects of Debt.” Journal of Economic Theory 62 (1994): 428-43.
9. Harris, M., and Raviv, A. “The Theory of Capital Structure.” Journal of Finance 46 (1991): 297-355.
10. Maksimovic, V. “Capital Structure in Repeated Oligopolies.” Rand Journal of Economics 19 (1988): 389-406.
11. Modigliani, F., and Miller, M. H. “The Cost of Capital, Corporation, and the Theory of Investment.” American Economic Review 48 (1958): 261-97.
12. Showalter, D. “Oligopoly and Financial Structure: Comment.” American Economic Review 85 (1995): 647-53.
 

Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: sje@plaza.snu.ac.kr
Copyright (c) 2020 SJE. All rights reserved.