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Managers, Debt and Industry Equilibrium

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  • Erlend Nier

Abstract

This paper reconsiders the strategic effect of debt under the assumption that quantity choices are made by managers whose objective is t avoid bankruptcy. The basic result is that quantity choices, which are strategic substitutes under profit maximization, may turn into strategic complements under reasonable assumptions on the profit function. The value a delegation, optimal wage contracts, and empirical implications are discussed.

Suggested Citation

  • Erlend Nier, 1998. "Managers, Debt and Industry Equilibrium," FMG Discussion Papers dp289, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp289
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    File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp289.pdf
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    Cited by:

    1. Spagnolo, Giancarlo, 1998. "Debt as a (Credible) Collusive Device, or: "Everybody Happy but the Consumer"," SSE/EFI Working Paper Series in Economics and Finance 243, Stockholm School of Economics, revised 01 Aug 2004.

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