Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5078109 | International Journal of Industrial Organization | 2013 | 10 Pages |
Abstract
We consider takeover bidding in a Cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target and bidders can influence rivals' beliefs through their bids. We compare cash and profit-share auctions, first- and second-price, supplemented by entry fees. Since non-merged firms benefit from a merger if synergies are low, bidders are subject to a positive externality with positive probability; nevertheless, pooling does not occur. Unlike cash auctions, profit-share auctions are not revenue equivalent, and the second-price profit-share auction is more profitable than the other auctions.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Wei Ding, Cuihong Fan, Elmar G. Wolfstetter,