Mergers under Asymmetric Information � Is there a Lemons Problem?
Thomas Borek,
Stefan Buehler and
Armin Schmutzler
No 408, SOI - Working Papers from Socioeconomic Institute - University of Zurich
Abstract:
We analyze a Bayesian merger game under two-sided asymmetric information about firm types. We show that the standard prediction of the lemons market model�if any, only low-type firms are traded�is likely to be misleading: Merger returns, i.e. the difference between pre- and post-merger profits, are not necessarily higher for low-type firms. This has two implications. First, under very general conditions, equilibria exist where mergers take place, and there is no presumption that there is ineffciently low trade. Second, in these equilibria it is typically not the case that only low-type firms enter an agreement.
Keywords: merger; asymmetric information; oligopoly; single crossing (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 L33 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2004-07
New Economics Papers: this item is included in nep-bec, nep-com, nep-fmk, nep-ind and nep-mic
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Citations: View citations in EconPapers (14)
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https://www.econ.uzh.ch/apps/workingpapers/wp/wp0408.pdf First version, 2004 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0408
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