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FINANCIAL INTERMEDIATION AND ENTRY DETERRENCE

By Neelam Jain, Thomas D. Jeitschko, Leonard J. Mirman Tinbergen, Neelam Jain, Thomas D. Jeitschko and Leonard J. Mirman

Abstract

In this paper, we analyze the interaction between an incumbent rm's nancial contract with a bank and its product market decisions in the face of the threat of entry, in a dynamic model. 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 rst period, due to the threat of entry � and there are parameter values for which the bank makes more pro ts with the threat of entry than without

Topics: JEL Categories, D8, G3, L1. Keywords, Entry, Intermediation, Limit Pricing, Banking, information. (1
Year: 2000
OAI identifier: oai:CiteSeerX.psu:10.1.1.196.7516
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