Merger Performance under Uncertain Efficiency Gains

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 79.2004

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Firm Organization and Market Structure
• Subject: Horizontal merger ; Bayesian Cournot equilibrium ; Efficiency gains ; Market performance ; Horizontale Integration ; Oligopol ; Gleichgewichtstheorie ; Theorie ; Effizienzmarkthypothese

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Xue, Licun ; Amir, Rabah ; Diamantoudi, Effrosyni
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/117952
• Last update: 10.03.2025, 11:41 AM CET