Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76177
Authors: 
Borek, Thomas
Bühler, Stefan
Schmutzler, Armin
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0408
Abstract: 
We analyze a Bayesian merger game under two-sided asymmetric information about firm types. We show that the standard prediction of the lemons market model-if any, only low-type firms are traded-is likely to be misleading: Merger returns, i.e. the difference between pre- and post-merger profits, are not necessarily higher for low-type firms. This has two implications. First, under very general conditions, equilibria exist where mergers take place, and there is no presumption that there is inefficiently low trade. Second, in these equilibria it is typically not the case that only low-type firms enter an agreement.
Subjects: 
merger
asymmetric information
oligopoly
single crossing
JEL: 
D43
D82
L13
L33
Document Type: 
Working Paper

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