Economic Theory

, Volume 22, Issue 4, pp 793–815 | Cite as

Financial intermediation and entry-deterrence

  • Neelam Jain
  • Thomas D. Jeitschko
  • Leonard J. Mirman
Research Article

Summary. In this paper, we analyze the interaction between an incumbent's financial contract with a bank and its product market decisions in the face of a threat of entry, in a dynamic model with asymmetric information. The main results of the paper are: there exists a separating equilibrium with no limit pricing; the low-cost incumbent repays more to the bank in the first period due to the threat of entry; and there are parameter values for which the bank makes more profits with the threat of entry than without.

Keywords and Phrases: Entry, Intermediation, Limit pricing, Information. 
JEL Classification Numbers: D8, G3, L1. 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Neelam Jain
    • 1
  • Thomas D. Jeitschko
    • 2
  • Leonard J. Mirman
    • 3
  1. 1.Jesse H. Jones Graduate School of Management, Rice University, MS 531, P.O. Box 2932, Houston, TX 77252-2932, USA (e-mail: jain@rice.edu) US
  2. 2.Department of Economics, Michigan State University, East Lansing, MI 48824, USA (e-mail: jeitschk@msu.edu) US
  3. 3.Department of Economics, University of Virginia, 114 Rouss Hall, Charlottesville, VA 22903, USA (e-mail: lm8h@virginia.edu) US

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