The Incentives for Takeover in Oligopoly

Christian Wey and Roman Inderst

No 3163, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper presents a model of takeover incentives in an oligopolistic industry, which, in contrast to previous approaches, takes both insiders' and outsiders' gains from an increase in industry concentration into account. Our main application is to compare takeover incentives in a differentiated Cournot and Bertrand oligopoly model with linear demand and costs. We provide a complete analysis for arbitrary numbers of firms, complements and substitutes, and degrees of product differentiation. An increase in concentration is more likely under Cournot competition if products are complements and more likely under Bertrand competition if products are substitutes. Moreover, as products become closer substitutes, a takeover becomes more likely under Bertrand and less likely under Cournot competition.

Keywords: Merger; Takeover bidding; Oligopoly (search for similar items in EconPapers)
JEL-codes: D43 D44 L10 L41 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The incentives for takeover in oligopoly (2004)
Working Paper: The Incentives for Takeover in Oligopoly (2004)
Working Paper: The Incentives for Takeover in Oligopoly (2001)
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