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Entry deterrence under financial intermediation with private information and hidden contracts

Author

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  • Neelam Jain
  • Thomas Jeitschko
  • Leonard Mirman

Abstract

We study how financial intermediation affects market entry when an incumbent monopolist enters into non-public, short-term contracts for outside funds. Financial intermediation serves as a commitment device to avoid costly signalling, but at the same time leads to strategic experimentation by the bank. Without public commitment to the financial contract, signal-jamming affects the bank's strategic experiment. Unlike the previous literature on signalling and signal-jamming in entry deterrence in which entry is unaffected or its change indeterminate, the altered strategic experiment has the effect of increasing the amount of entry to the market. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Neelam Jain & Thomas Jeitschko & Leonard Mirman, 2005. "Entry deterrence under financial intermediation with private information and hidden contracts," Review of Economic Design, Springer;Society for Economic Design, vol. 9(3), pages 203-225, August.
    • Handle: RePEc:spr:reecde:v:9:y:2005:i:3:p:203-225
    DOI: 10.1007/s10058-005-0128-8
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    Citations

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    Cited by:

    1. Jain, Neelam, 2011. "Entry deterrence and experimentation under demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 464-472, July.
    2. Spiros Bougheas & Saksit Thananittayaudom, 2006. "Financial Predation by the "Weak"," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 5(3), pages 231-244, December.
    3. Neelam Jain & Thomas D. Jeitschko & Leonard J. Mirman, 2003. "Entry Deterrence under Agency Constraints," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(3), pages 179-195, December.
    4. Neelam Jain & Leonard Mirman, 2011. "Lender learning and entry under general demand uncertainty," Review of Economic Design, Springer;Society for Economic Design, vol. 15(2), pages 163-175, June.

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