Analyzing Mergers under Asymmetric Information: A Simple Reduced-Form Approach

Thomas Borek (), Stefan Bühler () and Armin Schmutzler
Authors registered in the RePEc Author Service: Stefan Buehler

University of St. Gallen Department of Economics working paper series 2008 from Department of Economics, University of St. Gallen

Abstract: This paper provides a simple reduced-form framework for analyzing merger decisions in the presence of asymmetric information about firm types, building on Shapiro's (1986) oligopoly model with asymmetric information about marginal costs. We employ this framework to examine what types of firms are likely to be involved in mergers. While we give sufficient conditions under which only low-type firms merge, as a lemons rationale would suggest, we also argue that these conditions will often be violated in practice. Finally, our analysis shows how signaling considerations affect merger decisions.

Keywords: merger; asymmetric information; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 L33 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2008:2008-15

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