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The incentives for takeover in oligopoly

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  • Inderst, Roman
  • Wey, Christian

Abstract

This paper presents a model of takeover incentives in an oligopolistic industry, which,in contrast to previous approaches, takes both insiders' and outsiders' gains from anincrease in industry concentration into account. Our main application is to comparetakeover incentives in a differentiated Cournot and Bertrand oligopoly model withlinear demand and costs. We provide a complete analysis for arbitrary numbers of firms,complements and substitutes, and degrees of product differentiation. An increase inconcentration is more likely under Cournot competition if products are complementsand more likely under Bertrand competition if products are substitutes. Moreover, asproducts become closer substitutes, a takeover becomes more likely under Bertrand andless likely under Cournot competition. ZUSAMMENFASSUNG - (Übernahmeanreize im Oligopol) In dieser Arbeit wird ein Modell zur Analyse von Fusionsanreizen vorgestellt, in dem - im Gegensatz zu vorhergehenden Untersuchungen - sowohl die Gewinnzuwächse der an der Fusion beteiligten Firmen als auch die Gewinnveränderungen der Konkurrenzunternehmen die Übernahmewahrscheinlichkeit bestimmen. Die wichtigste Anwendung ist der Vergleich der Übernahmeanreize im Cournot- und Bertrand-Oligopol mit differenzierten Gütern und linearen Nachfrage- und Kostenfunktionen. Die Arbeit bietet eine vollständige Analyse für eine beliebige Anzahl von Unternehmen, komplementäre und substituierbare Güter und unterschiedliche Grade der Produktdifferenzierung. Eine Zunahme der Konzentration in einer Industrie ist wahrscheinlicher bei Cournot-Konkurrenz, wenn die Güter komplementär sind, und wahrscheinlicher bei Bertrand-Konkurrenz, wenn die Güter substituierbar sind. Des weiteren steigt (sinkt) die Übernahmewahrscheinlichkeit mit zunehmender Substituierbarkeit der Güter bei Bertrand- (Cournot-) Konkurrenz.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 22 (2004)
Issue (Month): 8-9 (November)
Pages: 1067-1089

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Handle: RePEc:eee:indorg:v:22:y:2004:i:8-9:p:1067-1089

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Web page: http://www.elsevier.com/locate/inca/505551

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Citations

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Cited by:
  1. Burguet, Roberto & Caminal, Ramon, 2012. "Bargaining failures and merger policy," CEPR Discussion Papers 8989, C.E.P.R. Discussion Papers.
  2. Roland Kirstein, 2013. "Fight or buy? A comparison of internationalization strategies," FEMM Working Papers 130003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  3. Banal-Estanol, A. & Heidhues, P., 2006. "Merged clusters during economic booms," Working Papers 06/07, Department of Economics, City University London.
  4. Granier, Laurent & Podesta, Marion, 2010. "Bundling and Mergers in Energy Markets," Energy Economics, Elsevier, vol. 32(6), pages 1316-1324, November.
  5. Albert Banal‐Estañol & Paul Heidhues & Rainer Nitsche & Jo Seldeslachts, 2010. "Screening And Merger Activity," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 794-817, December.
  6. Jozsef Molnar, 2002. "Preemptive Horizontal Mergers: Theory and Evidence," IEHAS Discussion Papers 0213, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  7. Christos Cabolis & Constantine Manasakis & Emmanuel Petrakis, 2008. "Horizontal Mergers and Acquisitions with Endogenous Efficiency Gains," Working Papers 0817, University of Crete, Department of Economics.
  8. repec:ebl:ecbull:v:4:y:2008:i:14:p:1-5 is not listed on IDEAS
  9. Marco Pagnozzi & Antonio Rosato, 2014. "Entry by Takeover: Auctions vs. Negotiations," CSEF Working Papers 353, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. Rosato, Antonio, 2008. "“Matching Auctions” for Hostile Takeovers: A Model with Endogenous Target," MPRA Paper 15083, University Library of Munich, Germany, revised 07 Jan 2009.
  11. Felix Höffler, 2008. "On the consistent use of linear demand systems if not all varieties are available," Economics Bulletin, AccessEcon, vol. 4(14), pages 1-5.

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