The Insiders' Dilemma: An Experiment on Merger Formation
This paper tests the insiders' dilemma hypothesis in a laboratory experiment. The insiders' dilemma means that a profitable merger does not occur, because it is even more profitable for each firm to unilaterally stand as an outsider (Kamien and Zang, 1990 and 1993). The experimental data provides support for the insiders' dilemma, and thereby for endogenous rather than exogenous merger theory. More surprisingly, our data suggests that fairness considerations also make profitable mergers difficult. Mergers that should occur in equilibrium do not, since they require an unequal split of surplus.
|Date of creation:||19 Sep 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden|
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ernst Fehr & Klaus M. Schmidt, .
"A Theory of Fairness, Competition and Cooperation,"
IEW - Working Papers
004, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
- Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
- Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
- Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000.
"Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?,"
International Journal of Industrial Organization,
Elsevier, vol. 18(1), pages 39-57, January.
- Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," Industrial Organization 9803004, EconWPA.
- Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
- Kamien, Morton I & Zang, Israel, 1993. "Monopolization by Sequential Acquisition," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 205-29, October.
- Fridolfsson, Sven-Olof & Stennek, Johan, 2005. "Hold-up of anti-competitive mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 753-775, December.
- Davis, Douglas D., 2002. "Strategic interactions, market information and predicting the effects of mergers in differentiated product markets," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1277-1312, November.
- Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
- Kamien, Morton I. & Zang, Israel, 1991.
"Competitively cost advantageous mergers and monopolization,"
Games and Economic Behavior,
Elsevier, vol. 3(3), pages 323-338, August.
- Morton I. Kamien & Israel Zang, 1988. "Competitively Cost Advantageous Mergers and Monopolization," Discussion Papers 799, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Persson, Lars & Horn, Henrik, 1998.
"Endogenous Mergers in Concentrated Markets,"
Working Paper Series
513, Research Institute of Industrial Economics.
- repec:hhs:iuiwop:542 is not listed on IDEAS
- Szidarovszky, F. & Yakowitz, S., 1982. "Contributions to Cournot oligopoly theory," Journal of Economic Theory, Elsevier, vol. 28(1), pages 51-70, October.
- Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
- Armando Gomes, .
"A Theory of Negotiation and Formation of Coalition,"
CARESS Working Papres
99-12, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Armando Gomes, . "A Theory of Negotiations and Formation of Coalitions," Rodney L. White Center for Financial Research Working Papers 21-99, Wharton School Rodney L. White Center for Financial Research.
- Fridolfsson, Sven-Olof & Stennek, Johan, 2000. "Why Event Studies Do Not Detect Anti-Competitive Mergers," Working Paper Series 542, Research Institute of Industrial Economics.
- Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
- Morton I. Kamien & Israel Zang, 1990. "The Limits of Monopolization Through Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 465-499.
When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0563. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.