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Pricing strategy and financial policy

Dasgupta, Sudipto and Titman, Sheridan (1998) Pricing strategy and financial policy. Review of Financial Studies, 11 (4). pp. 705-737. ISSN 0893-9454

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Recent empirical evidence indicates that capital structure changes affect pricing strategies. In most cases, prices increase following the implementation of a leveraged buyout of a major firm in an industry, with the more leveraged firm in the industry charging higher prices on average. Notable exceptions exist, however, when the leverage increasing firm's rival is relatively unlevered. The first observation is consistent with a model where firms compete for market share on the basis of price. The second observation can be explained within the context of a Stackelberg model where the relatively unlevered rival acts as the Stackelberg price leader.

Item Type: Journal Article
Journal or Publication Title: Review of Financial Studies
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 74558
Deposited By: ep_importer_pure
Deposited On: 08 Jul 2015 14:12
Refereed?: Yes
Published?: Published
Last Modified: 15 May 2018 04:55
Identification Number:

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