Using a difference-in-differences (DiD) setting that leverages the staggered adoption of R&D tax credits across the U.S. states, we show that after a firm receives the tax credits, products of its peers become significantly more similar to the recipient firm. Such product convergence is...

We construct a unified framework to study credit rationing by the loan size. Due to default risk, the loan offer curve is positive-sloping. At the equilibrium interest rate, increasing the loan size reduces the average cost of the loan, so the borrower always demands a larger loan than that the...

We use a variant of the Hotelling (1929) model to illustrate that, when a firm faces hard payment constraint(s), financially strong rivals may adopt predatory strategies to drive the firm out of the product market and hence to obtain extra profit from enhanced market power later on. Predation is...

We construct a unified framework to study credit rationing by the loan size. Due to default risk, the loan offer curve is positive-sloping. At the equilibrium interest rate, increasing the loan size reduces the average cost of the loan, so the borrower always demands a larger loan than that the...

We use a variant of the Hotelling (1929) model to illustrate that, when a firm faces hard payment constraint(s), financially strong rivals may adopt predatory strategies to drive the firm out of the product market and hence to obtain extra profit from enhanced market power later on. Predation is...

With a more general setting, we illustrate that credit rationing in the Stiglitz and Weiss (1981) model is sensitive to the ranking of projects. Given that the ranking is according to the mean-preserving-spread, adverse selection and moral hazard cannot co-exist and credit rationing occurs only...

We construct a model to illustrate the dynamics of cash flow volatility and firm valuation. As a firm progressively invests into its growth opportunities, its book value increases and catches up with its market value, reducing the valuation multiple (Q). Cash flow volatility (CFV) decreases due...