Mergers and Partial Ownership

Øystein Foros, Hans Jarle Kind and Greg Shaffer ()
Additional contact information
Greg Shaffer: University of Rochester and University of East Anglia, Postal: University of Rochester , William E. Simon Graduate School , RC Box 270100 , Rochester, NY 14627 , USA

No 2010/15, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: In this paper we compare the profitability of a merger between two firms (one firm fully acquires another) and the profitability of a partial ownership arrangement between the same two firms in which the acquiring firm obtains corporate control over the pricing decisions of the acquired firm. We find that joint profit can be higher in the latter case because it may result in a greater dampening of competition with respect to an outside competitor. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firm and use them to explain puzzling features of the pay-TV markets in Norway and Sweden.

Keywords: Media economics; Mergers; Corporate Control; Financial Control (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-12-11
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Mergers and partial ownership (2011)
Working Paper: Mergers and Partial Ownership (2010)
Working Paper: Mergers and Partial Ownership (2010)
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