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Code Creation In Endogenous Merger Experiments

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  • LAUREN FEILER
  • COLIN F. CAMERER

Abstract

We study the conflict that can occur in a merger due to firms' use of specialized language, or “code,” and whether participants accurately forecast this difficulty. After creating a shared code to describe different pictures accurately, subjects bid for extra payments to join a merged group. The two lowest bidders are placed in the merged group. Values inferred from two different bidding procedures indicate fairly accurate general appraisals of the cost of the merger, but the values of those subjects who bid the least, and choose to join the merged group, are too optimistic, reflecting an “organizational winner's curse.” (JEL D23, D83, G34, L21, M14)

Suggested Citation

  • Lauren Feiler & Colin F. Camerer, 2010. "Code Creation In Endogenous Merger Experiments," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 337-352, April.
    • Handle: RePEc:bla:ecinqu:v:48:y:2010:i:2:p:337-352
    DOI: 10.1111/j.1465-7295.2009.00200.x
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    Cited by:

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    2. Massimo Warglien, 2013. "Language and economic organization," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 8, Edward Elgar Publishing.
    3. Bose, Gautam & Dechter, Evgenia & Ivancic, Lorraine, 2023. "Conformity and adaptation in groups," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 1267-1285.
    4. Jan Schmitz, 2019. "When Two Become One: How Group Mergers Affect Solidarity," Games, MDPI, vol. 10(3), pages 1-42, July.

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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