Modelling firm mergers as a roommate problem
We propose a way to model firm mergers using a matching game known as the roommate problem, whereby firms are assumed to make preference rankings of potential merger partners. The position of a firm in another firm's ranking is assumed to be governed by an index, which in turn consists of a deterministic part and of a stochastic one, similar to the latent indices used in standard discrete-choice models. Given all firms' preferences, game-theoretic mechanisms lead to a matching whereby each firm is either self-matched or assigned a merger partner. We derive expressions for the probability of a merger between a specific firm pair, and also a log-likelihood function for estimation using firm-specific data. Using a simulation in a setting with groups of three firms involved in roommate games within each group, the model's finite-sample properties are examined.
|Date of creation:||20 Jan 2006|
|Contact details of provider:|| Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden|
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.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.:
- Roth, Alvin E. & Sotomayor, Marilda, 1992.
Handbook of Game Theory with Economic Applications,
in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541
- Horn, Henrik & Persson, Lars, 2001.
"Endogenous mergers in concentrated markets,"
International Journal of Industrial Organization,
Elsevier, vol. 19(8), pages 1213-1244, September.
- Roth, Alvin E & Vande Vate, John H, 1990. "Random Paths to Stability in Two-Sided Matching," Econometrica, Econometric Society, vol. 58(6), pages 1475-1480, November.
- Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
- Fridolfsson, Sven-Olof & Stennek, Johan, 2006.
"Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers,"
Working Paper Series
682, Research Institute of Industrial Economics.
- Sven-Olof Fridolfsson & Johan Stennek, 2010. "Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers," Economica, London School of Economics and Political Science, vol. 77(308), pages 734-750, October.
- Fridolfsson, Sven-Olof & Stennek, Johan, 2006. "Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers," CEPR Discussion Papers 5977, C.E.P.R. Discussion Papers.
- Diamantoudi, Effrosyni & Miyagawa, Eiichi & Xue, Licun, 2004. "Random paths to stability in the roommate problem," Games and Economic Behavior, Elsevier, vol. 48(1), pages 18-28, July.
- John K. Dagsvik & Ane S. Flaatten & Helge Brunborg, 1998. "A Behavioral Two-Sex Marriage Model," Discussion Papers 238, Statistics Norway, Research Department.
- 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:uunewp:2006_010. 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: (Katarina Grönvall)
If references are entirely missing, you can add them using this form.