Getting a Better Price: Strategic Behaviour before Changes in Ownership of Corporate Assets

Richard Friberg, Pehr-Johan Norbäck and Lars Persson

No 777, Working Paper Series from Research Institute of Industrial Economics

Abstract: We propose a model of investments prior to corporate ownership changes. We derive conditions under which the selling of a firm triggers overinvestment by both the seller and the buyer prior to the asset transfer. In a setting with Cournot competition, we show that these incentives can drive the consumer prices in a post-acquisition duopoly below those of an ongoing triopoly. Our analysis warns against a mechanical use of pre-merger benchmarks in ex post merger evaluations.

Keywords: Mergers & Acquisitions; Ownership; Auctions; Strategic Investments; Merger Evaluations (search for similar items in EconPapers)
JEL-codes: L13 L40 L66 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-11-13
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0777

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