Consequences of Corporate Debt Financing in Price Agreements’ Stability

Rok, strany: 2005, 1038 - 1050

The present article aims to show that price agreements are more unstable if their companies use debt as a financing instrument. Moreover, the higher the number of companies (that use debt) in a price agreement, the more instable the price agreement will be. Even when companies compete à la Bertrand and if debt financing is high, the duopoly of price agreement will be instable. When debt financing is present, we found there is a higher number of sub-game perfect Equilibria, in an a posteriori à la Cournot competition, then when debt financing is not present and that this (possible) existence of sub-game perfect Equilibria increases as the debt level of financing increases.

ISO 690:

Macas, P., Serrasqueiro, Z., Saraiva, P. 2005. Consequences of Corporate Debt Financing in Price Agreements’ Stability. In Ekonomický časopis/Journal of Economics, vol. 53, no.10, pp. 1038-1050. 0013-3035.

APA:

Macas, P., Serrasqueiro, Z., Saraiva, P. (2005). Consequences of Corporate Debt Financing in Price Agreements’ Stability. Ekonomický časopis/Journal of Economics, 53(10), 1038-1050. 0013-3035.