Bargaining failures and merger policy
Roberto Burguet and
Ramon Caminal ()
UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)
In this paper we study the optimal ex-ante merger policy in a model where merger proposals are the result of strategic bargaining among alternative candidates. We allow for firm asymmetries and, in particular, we emphasize the fact that potential synergies generated by a merger may vary substantially depending on the identity of the participating firms. The model demonstrates that, under some circumstances, relatively inefficient mergers may take place. That is, a particular merger may materialize despite the existence of an alternative merger capable of generating higher social surplus and even higher profits. Such bargaining failures have important implications for the ex-ante optimal merger policy. We show that a more stringent policy than the ex-post optimal reduces the scope of these bargaining failures and raises expected social surplus. We use a bargaining model that is flexible, in the sense that its strategic structure does not place any exogenous restriction on the endogenous likelihood of feasible mergers.
Keywords: endogenous mergers; merger policy; bargaining; synergies (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Journal Article: BARGAINING FAILURES AND MERGER POLICY (2015)
Working Paper: Bargaining Failures and Merger Policy (2014)
Working Paper: Bargaining failures and merger policy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:901.12
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