The strategic use of debt reconsidered

Marco A. Haan*, Linda Toolsema-Veldman

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

11 Citations (Scopus)

Abstract

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. (C) 2007 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)616-624
Number of pages9
JournalInternational Journal of Industrial Organization
Volume26
Issue number2
DOIs
Publication statusPublished - Mar-2008
EventIJIO Symposium on Public/Private Partnerships - , France
Duration: 1-Jan-2006 → …

Keywords

  • capital structure
  • product market competition
  • CAPITAL STRUCTURE
  • FINANCIAL STRUCTURE
  • EMPIRICAL-ANALYSIS
  • OLIGOPOLY
  • INDUSTRY
  • MARKETS
  • DUOPOLY

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