The strategic use of debt reconsidered
We consider a two-stage differentiated goods duopoly model with demand uncertainty linking firms' capital structure choice to their output market decisions. Using a numerical analysis, we study how the equilibrium of the model is affected by demand volatility and the substitutability between products. In doing so, we correct a mistake in earlier papers in this literature. Most importantly, we find that the equilibrium debt level decreases as demand becomes more volatile.
Year of publication: |
2008
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Authors: | Haan, Marco A. ; Toolsema, Linda A. |
Published in: |
International Journal of Industrial Organization. - Elsevier, ISSN 0167-7187. - Vol. 26.2008, 2, p. 616-624
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Publisher: |
Elsevier |
Saved in:
Online Resource
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