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The Incentives for Takeover in Oligopoly

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  • Roman Inderst
  • Christian Wey

Abstract

We present a model of takeover where the target optimally sets its reserve price. Under relatively standard symmetry restrictions, we obtain a unique equilibrium. The probability of takeover is only a function of the number of .rms and of the insiders. share of total industry gains due to the increase in concentration. Our main application is to the linear Cournot and Bertrand models. A takeover is more likely under Bertrand competition if goods are substitutes and more likely under Cournot competition if goods are complements.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.41820.de/dp423.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 423.

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Length: 24 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp423

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Keywords: Takeover bidding; Merger incentives; Oligopoly;

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References

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  1. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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  8. Robert Comment & G. William Schwert, 1993. "Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures," NBER Working Papers 4316, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Granier, Laurent & Podesta, Marion, 2010. "Bundling and Mergers in Energy Markets," Energy Economics, Elsevier, vol. 32(6), pages 1316-1324, November.
  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. 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.
  4. repec:ebl:ecbull:v:4:y:2008:i:14:p:1-5 is not listed on IDEAS
  5. Albert Banal-Estañol & Paul Heidhues & Rainer Nitsche & Jo Seldeslachts, 2006. "Merger Clusters during Economic Booms," CIG Working Papers SP II 2006-17, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. 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.
  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. Roberto Burguet & Ramon Caminal, 2012. "Bargaining failures and merger policy," UFAE and IAE Working Papers 901.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. 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.
  10. 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.
  11. 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.

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