Bargaining failures and merger policy
Roberto Burguet and
Ramon Caminal ()
No 8989, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 consumer surplus. We use a bargaining model that is flexible, in the sense that its strategic structure does not place any exogenous restriction on the dendogenous likelihood of feasible mergers.
Keywords: bargaining; endogenous mergers; merger policy; 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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