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Managerial delegation and merger incentives

Author

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  • Straume, Odd Rune

    (Institute for Research in Economics and Business Administration (SNF))

Abstract

We analyse how the internal organisation of firms affects the correspondence between private and social incentives for horizontal merger. Applying a model of endogenous merger formation in a three-firm asymmetric Cournot industry, we contrast the cases of entrepreneurial and managerial firms. The use of strategic delegation increases both the probability that a merger takes place and the likelihood that the ‘wrong’ type of merger is undertaken, from a viewpoint of social welfare. This suggests that managerial delegation increases the scope for antitrust policy.

Suggested Citation

  • Straume, Odd Rune, 2003. "Managerial delegation and merger incentives," Working Papers in Economics 04/03, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2003_004
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    References listed on IDEAS

    as
    1. Fauli-Oller, Ramon & Sandonis, Joel, 2003. "To merge or to license: implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 655-672, May.
    2. Gonzalez-Maestre, Miguel & Lopez-Cunat, Javier, 2001. "Delegation and mergers in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1263-1279, September.
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    More about this item

    Keywords

    Managerial delegation; Endogenous mergers; Cost asymmetry; Antitrust policy.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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