We study the interactions between the capital structure and the technological flexibility choices of firms in a duopoly. When there are bankruptcy costs, a leveraged firm may modify its strategic choices in order to decrease its probability of bankruptcy. We show that, when the capacity level of...

We show that whether observing technological choices made by competitors is possible or not has significant impacts on the equilibrium technological configurations. Depending upon the industry characteristics, the strategic value of technological flexibility may be either positive or negative,...

Our objective in this paper is to illustrate and better understand the unavoidable arbitrage between incentives and flexibility in contexts of asymmetric information and to characterize the general features of an appropriate response to this challenge. We show that procedures and institutions in...