Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/117952 
Year of Publication: 
2004
Series/Report no.: 
Nota di Lavoro No. 79.2004
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
In view of the uncertainty over the ability of merging firms to achieve efficiency gains, we model the post-merger situation as a Cournot oligopoly wherein the outsiders face uncertainty about the merged entity's final cost. At the Bayesian equilibrium, a bilateral merger is profitable provided that non-merged firms sufficiently believe that the merger will generate large enough efficiency gains, even if ex post none actually materialize. The effects of the merger on market performance are shown to follow similar threshold rules. The findings are broadly consistent with stylized facts, and provide a rationalization for an efficiency consideration in merger policy.
Subjects: 
Horizontal merger
Bayesian Cournot equilibrium
Efficiency gains
Market performance
JEL: 
D43
L11
L22
Document Type: 
Working Paper

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