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Merger Wars: Bidding for Complementary Assets

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Author Info
Lynne Pepall ()
Daniel Richards ()

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Abstract

We examine the bidding competition for a set of complementary assets arising between two firms who also compete in a differentiated product market. The bidding contest takes the form of an acquisition battle for a third firm initially holding the assets. Depending on the nature of product competition between the bidding firms, either both bidding firms are made worse off by the availability of these assets or, paradoxically, the firm winning the bidding contest is less profitable than is the firm losing it. Our analysis is relevant to the many recent mergers in telecommunications, finance, and transportation, e.g., Viacom’s purchase of CBS.

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Publisher Info
Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0020.

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Date of creation: 2000
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Handle: RePEc:tuf:tuftec:0020

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Related research
Keywords: mergers; product differentiation; bidding;

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Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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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. [Downloadable!] (restricted)
  2. Yannis M. Ioannides & Henry G. Overman, 2000. "Zipf's Law for Cities: An Explanation," Discussion Papers Series, Department of Economics, Tufts University 0006, Department of Economics, Tufts University. [Downloadable!]
  3. Y Ioannides & Henry Overman, 2000. "Spatial Evolution of the US Urban System," CEP Discussion Papers dp0482, Centre for Economic Performance, LSE. [Downloadable!]
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  4. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2000. "Computational Analysis of the Government of India's Market Opening Initiatives," Discussion Papers Series, Department of Economics, Tufts University 0002, Department of Economics, Tufts University. [Downloadable!]
  5. Gilbert E. Metcalf, 2000. "Environmental Levies and Distortionary Taxation: Pigou, Taxation, and Pollution," Discussion Papers Series, Department of Economics, Tufts University 0004, Department of Economics, Tufts University. [Downloadable!]
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  6. Timothy F. Harris & Yannnis M. Ioannides, 2000. "Productivity and Metropolitan Density," Discussion Papers Series, Department of Economics, Tufts University 0016, Department of Economics, Tufts University. [Downloadable!]
  7. Loughran, Tim & Vijh, Anand M, 1997. " Do Long-Term Shareholders Benefit from Corporate Acquisitions?," Journal of Finance, American Finance Association, vol. 52(5), pages 1765-90, December. [Downloadable!] (restricted)
  8. Yannis M. Ioannides & Jeffrey E. Zabel, 2000. "Neighborhood Effects and Housing Demand," Discussion Papers Series, Department of Economics, Tufts University 0012, Department of Economics, Tufts University. [Downloadable!]
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This page was last updated on 2009-11-18.

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