Price-setting behavior in the presence of social interactions

Adriaan Soetevent and Lambert Schoonbeek

No 200307, CCSO Working Papers from University of Groningen, CCSO Centre for Economic Research

Abstract: 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.

Date: 2003
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Journal Article: Price-Setting Behavior in the Presence of Social Interactions (2006)
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