Mergers and partial ownership
AbstractWe compare the profitability of a merger between two firms in which one firm fully acquires another and the profitability of a partial ownership arrangement in which the acquiring firm, although owning less than 100% of the acquired firm, is nevertheless able to obtain corporate control over all pricing decisions. We find that joint profit can be higher in the latter case because it may result in a greater dampening of competition with respect to an outside competitor when the partial ownership arrangement is publicly observable. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firm and use them to explain puzzling features of the pay-TV markets in Norway and Sweden.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 55 (2011)
Issue (Month): 7 ()
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Web page: http://www.elsevier.com/locate/eer
Mergers; Corporate control; Financial control; Media economics;
Other versions of this item:
- Foros, Øystein & Kind, Hans Jarle & Shaffer, Greg, 2010. "Mergers and Partial Ownership," Discussion Paper Series in Economics 1/2010, Department of Economics, Norwegian School of Economics.
- Foros, Øystein & Kind, Hans Jarle & Shaffer, Greg, 2010. "Mergers and Partial Ownership," Discussion Papers 2010/15, Department of Business and Management Science, Norwegian School of Economics.
- Oystein Foros & Hans Jarle Kind & Greg Shaffer, 2010. "Mergers and Partial Ownership," CESifo Working Paper Series 2912, CESifo Group Munich.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
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