Information-Sharing Implications of Horizontal Mergers

Albert Banal-Esta?l ()
Authors registered in the RePEc Author Service: Albert Banal-Estanol

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We analyze the effects of uncertainty and private information on horizontal mergers. Firms face uncertain demands or costs and receive private signals. They may decide to merge sharing their private information. If the uncertainty parameters are independent and the signals are perfect, uncertainty generates an informational advantage only to the merging firms, increasing merger incentives and decreasing free-riding effects. Thus, mergers become more profitable and stable. These results generalize to the case of correlated parameters if the correlation is not very severe, and for perfect correlation if the firms receive noisy signals. From the normative point of view, mergers are socially less harmful compared to deterministic markets and may even be welfare enhancing. If the signals are, instead, publicly observed, uncertainty does not necessarily give more incentives to merge, and mergers are not always less socially harmful.

Keywords: Horizontal Merger; Uncertainty; Information Sharing (search for similar items in EconPapers)
JEL-codes: D82 L13 (search for similar items in EconPapers)
Pages: 31
Date: 2002-10-28
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Information-sharing implications of horizontal mergers (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:544.02

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