Mergers under asymmetric information - is there a lemons problem?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0408

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 ; Fusion ; Übernahme ; Asymmetrische Information ; Oligopol ; Spieltheorie

Contributors, Places and Time

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

Further information

• Handle: http://hdl.handle.net/10419/76177
• Last update: 10.03.2025, 11:42 AM CET