Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81474
Authors: 
Friberg, Richard
Norbäck, Pehr-Johan
Persson, Lars
Year of Publication: 
2008
Series/Report no.: 
IFN Working Paper 777
Abstract: 
We propose a model of investments prior to corporate ownership changes. We derive conditions under which the selling of a firm triggers overinvestment by both the seller and the buyer prior to the asset transfer. In a setting with Cournot competition, we show that these incentives can drive the consumer prices in a post-acquisition duopoly below those of an ongoing triopoly. Our analysis warns against a mechanical use of pre-merger benchmarks in ex post merger evaluations.
Subjects: 
Mergers & Acquisitions
Ownership
Auctions
Strategic Investments
Merger Evaluations
JEL: 
L13
L40
L66
Document Type: 
Working Paper

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