Arbeitspapier
The Limited Liability Effect in Experimental Duopoly Markets
Brander and Lewis argue in a seminal paper (AER, 1986) that a firm's debt-equity ratio should have important strategic effects on product market competition. We test their model in a duopoly experiment under both, Bertrand and Cournot competition. We find that leverage has strategic effects, but those effects are much weaker than predicted by theory. Specifically, we find for price competition a general tendency towards collusion, which has the same overall consequences - but deviates from - the subgame perfect equilibrium prediction. With quantity competition subjects choose much less debt than predicted by theory. It appears that subjects recognize the strategic effects of their own debt. However, they do not (want to) acknowledge possible strategic advantages of opponents' debt.
- Sprache
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Englisch
- Erschienen in
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Series: Bonn Econ Discussion Papers ; No. 36/2001
- Klassifikation
-
Wirtschaft
Oligopoly and Other Imperfect Markets
Bankruptcy; Liquidation
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- Thema
-
oligopoly
bankruptcy
debt-equity ratio
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Oechssler, Jörg
Schuhmacher, Frank
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Bonn, Bonn Graduate School of Economics (BGSE)
- (wo)
-
Bonn
- (wann)
-
2001
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Oechssler, Jörg
- Schuhmacher, Frank
- University of Bonn, Bonn Graduate School of Economics (BGSE)
Entstanden
- 2001
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