Managerial Delegation and Merger Incentives with Asymmetric Costs

Odd Rune Straume

Journal of Institutional and Theoretical Economics (JITE), 2006, vol. 162, issue 3, 450-469

Abstract: We analyse how the internal organisation of firms affects the correspondence between private and social incentives for horizontal merger. Applying a model of endogenous merger formation in a three-firm asymmetric Cournot industry, we contrast the cases of entrepreneurial and managerial firms. The use of strategic delegation increases both the probability that a merger takes place and the likelihood that the wrong type of merger, from the viewpoint of social welfare, is undertaken. This suggests that managerial delegation increases the scope for antitrust policy.

JEL-codes: D21 D43 L11 L21 L41 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (20)

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