“Matching Auctions” for Hostile Takeovers: A Model with Endogenous Target
AbstractIn this paper we analyze incentives for a potential entrant to get into an oligopolistic Cournot-like market by taking over one of the incumbents and we derive the conditions under which the hostile merger is possible and profitable. The key-feature is that the target of the takeover is endogenously determined and this is also the main difference with respect to the previous literature on this topic. Actually, the main objective of our analysis is that of determining why and how the buyer chooses as target this firm rather than that one. The takeover game is modeled as a “matching auction” in which the potential entrant has to make a first and final offer and the other bidders are asked to match this offer. We find different types of SPNE depending upon the values of the parameters. Whenever entry takes place it reduces incumbents' profits and raises consumers' welfare at the same time.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 15083.
Date of creation: 26 Jun 2008
Date of revision: 07 Jan 2009
Takeovers; Matching Auctions; Mergers; SPNE;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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