COST OF CAPITAL AND MARKET POWER - THE EFFECT OF SIZE DISPERSION AND ENTRY BARRIERS ON MARKET EQUILIBRIUM
UNSPECIFIED. (1995) COST OF CAPITAL AND MARKET POWER - THE EFFECT OF SIZE DISPERSION AND ENTRY BARRIERS ON MARKET EQUILIBRIUM. SMALL BUSINESS ECONOMICS, 7 (3). pp. 205-212. ISSN 0921-898XFull text not available from this repository.
A market power explanation for the observed empirical fact that large firms in a given industry pay less for their capital than small is developed. Larger firms in an industry are shown to pay less for their capital than small because they have more control over the market and the riskiness of their divided stream is correspondingly smaller. More firms in an industry with a given size dispersion raises the cost of capital to the incumbents, but proportionately more to smaller firms. However, the most significant result is that a greater dispersion of sizes will reduce the riskiness of the dividend stream of the larger firm and increase the riskiness of the smaller firm, causing an increase in the dispersion of capital costs. Hence product market power enhances capital cost efficiencies.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HF Commerce
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
|Journal or Publication Title:||SMALL BUSINESS ECONOMICS|
|Publisher:||KLUWER ACADEMIC PUBL|
|Number of Pages:||8|
|Page Range:||pp. 205-212|
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