Weddings with uncertain prospects: Mergers under asymmetric information

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0213

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Asymmetric and Private Information; Mechanism Design ; Oligopoly and Other Imperfect Markets ; Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
• Subject: merger ; asymmetric information ; oligopoly ; single crossing ; Übernahme ; Asymmetrische Information ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Borek, Thomas ; Buehler, Stefan ; Schmutzler, Armin
• Event: Veröffentlichung
• (who): University of Zurich, Socioeconomic Institute
• (where): Zurich
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/76144
• Last update: 10.03.2025, 11:43 AM CET