Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76220
Authors: 
Gärtner, Dennis
Schmutzler, Armin
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0607
Abstract: 
We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and we investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post incentive compatible mechanisms, which use both players' reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.
Subjects: 
Mergers
Mechanism
Design
Asymmetric
Information
Interdependent
Valuations
Efficient
Mechanisms
JEL: 
D82
L10
G34
Document Type: 
Working Paper

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