Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76144
Authors: 
Borek, Thomas
Buehler, Stefan
Schmutzler, Armin
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0213
Abstract: 
We provide a framework for analyzing bilateral mergers when there is two-sided asymmetric information about firms' types. We show that there is always a no-merger equilibrium where firms do not consent to a merger, irrespective of their type. There may also be a cut-off equilibrium if the expected merger returns satisfy a suitable single crossing condition, which will hold if a firm's merger returns are essentially monotone decreasing in its type. Applying our analysis to the linear Cournot model, we show how the merger pattern depends on the cost effects of mergers, the extent of uncertainty, and the way profits are split. Specifically, we show how increasing uncertainty about competitor types may foster mergers as firms hope for strong rationalization effects.
Subjects: 
merger
asymmetric information
oligopoly
single crossing
JEL: 
D43
D82
L13
L33
Document Type: 
Working Paper

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