Price-setting behavior in the presence of social interactions
Adriaan Soetevent () and
No 200307, CCSO Working Papers from University of Groningen, CCSO Centre for Economic Research
We argue in this paper that a more active market for corporate control may weaken the takeover threat. We show that an increase in the number of potential raiders tends to decrease the probability of a takeover. This in turn weakens managerial incentives. The lower managerial effort level that results in equilibrium negatively affects the ex ante value of the firm.
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Journal Article: Price-Setting Behavior in the Presence of Social Interactions (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:gro:rugccs:200307
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