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Merger Wars: Bidding for Complementary Assets

  • Lynne Pepall

    ()

  • Daniel Richards

    ()

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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File URL: http://ase.tufts.edu/econ/papers/200020.pdf
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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
Date of revision:
Handle: RePEc:tuf:tuftec:0020
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  1. 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.
  2. 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.
  3. Gilbert E. Metcalf, 2000. "Environmental Levies and Distortionary Taxation: Pigou, Taxation, and Pollution," NBER Working Papers 7917, National Bureau of Economic Research, Inc.
  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.
  5. Chen, Yongmin, 2000. "Strategic Bidding by Potential Competitors: Will Monopoly Persist?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 161-75, June.
  6. 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.
  7. Yannis Ioannides & Henry G. Overman, 2004. "Spatial evolution of the US urban system," LSE Research Online Documents on Economics 600, London School of Economics and Political Science, LSE Library.
  8. Yannis M. Ioannides & Jeffrey E. Zabel, 2003. "Neighbourhood effects and housing demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 563-584.
  9. 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.
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