Abstract

This paper considers the relationship between market structure and payout policy within the context of an oligopoly in which firms must consider the strategic responses of their competitors. A differential game approach with a finite planning horizon is used for the analysis and a Markovian Nash equilibrium is obtained using a numerical method. The results suggest that given optimal payout policy market competition in the form of a duopoly results in greater reinvestment and earnings than that of a monopoly.

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