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Waiting to Merge

  • Fumagalli, Eileen

    ()

    (IEFE, Università Bocconi, Milan)

  • Nilssen, Tore

    ()

    (Dept. of Economics, University of Oslo)

We set up a sequential merger to study a firm's incentives to pass up on an opportunity to merge with another firm. We find that such incentives may exist when there are efficiency gains from a merger, firms are of different sizes, there is an anthitrust authority present to approve mergers, and there is sufficient alignment of interests between the antitrust authority and the firms. We point out three dstinctive motives for not merging: the external-effect motive, the bargaining-power motive, and the pill-sweetening motive.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2008/Memo-13-2008.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 13/2008.

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Length: 35 pages
Date of creation: 30 Jun 2008
Date of revision:
Handle: RePEc:hhs:osloec:2008_013
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Sven-Olof Fridolfsson & Johan Stennek, 2005. "Why Mergers Reduce Profits And Raise Share Prices-A Theory Of Preemptive Mergers," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1083-1104, 09.
  2. 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.
  3. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2003. "National versus International Mergers in Unionised Oligopoly," CEPR Discussion Papers 4040, C.E.P.R. Discussion Papers.
  4. Barros, Pedro Pita, 1998. "Endogenous mergers and size asymmetry of merger participants," Economics Letters, Elsevier, vol. 60(1), pages 113-119, July.
  5. Kamien, Morton I & Zang, Israel, 1990. "The Limits of Monopolization through Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 465-99, May.
  6. Nilssen, T. & Sorgard, L., 1995. "Sequential Horizontal Mergers," Memorandum 30/1995, Oslo University, Department of Economics.
  7. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1229-1257.
  8. Ganslandt, Mattias & Persson, Lars & Vasconcelos, Helder, 2008. "Asymmetric Cartels - a Theory of Ring Leaders," CEPR Discussion Papers 6829, C.E.P.R. Discussion Papers.
  9. Barros, Pedro Pita & Clougherty, Joseph A. & Seldeslachts, Jo, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," CEPR Discussion Papers 6437, C.E.P.R. Discussion Papers.
  10. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Toxvaerd, Flavio, 2008. "Strategic merger waves: A theory of musical chairs," Journal of Economic Theory, Elsevier, vol. 140(1), pages 1-26, May.
  12. Brito, Duarte, 2003. "Preemptive mergers under spatial competition," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1601-1622, December.
  13. Lindqvist, Tobias & Stennek, Johan, 2001. "The Insiders' Dilemma: An Experiment on Merger Formation," Research Papers in Economics 2001:8, Stockholm University, Department of Economics.
  14. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
  15. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  16. Larry D. Qiu & Wen Zhou, 2007. "Merger waves: a model of endogenous mergers," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 214-226, 03.
  17. Persson, Lars & Horn, Henrik, 1998. "Endogenous Mergers in Concentrated Markets," Working Paper Series 513, Research Institute of Industrial Economics.
  18. Fridolfsson, Sven-Olof, 2007. "Anti- versus Pro-Competitive Mergers," Working Paper Series 694, Research Institute of Industrial Economics.
  19. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  20. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  21. Helder Vasconcelos, 2005. "Tacit Collusion, Cost Asymmetries, and Mergers," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 39-62, Spring.
  22. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January.
  23. Brito, Duarte, 2005. "Should alternative mergers or acquisitions be considered by antitrust authorities?," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 129-153, February.
  24. Inés Macho-Stadler & David Pérez-Castrillo & Nicolás Porteiro, 2006. "Sequential Formation of Coalitions through Bilateral Agreements in a Cournot Setting," Working Papers 06.01, Universidad Pablo de Olavide, Department of Economics.
  25. Mihkel M. Tombak, 2002. "Mergers to Monopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 513-546, 09.
  26. Farrell, Joseph & Katz, Michael L, 2006. "The Economics of Welfare Standards in Antitrust," Competition Policy Center, Working Paper Series qt1tw2d426, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  27. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  28. Tobias Lindqvist & Johan Stennek, 2005. "The Insiders’ Dilemma: An Experiment on Merger Formation," Experimental Economics, Springer, vol. 8(3), pages 267-284, September.
  29. 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.
  30. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 155-176, Summer.
  31. Fumagalli, Eileen & Vasconcelos, Helder, 2009. "Sequential cross-border mergers," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 175-187, March.
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