Analyzing Mergers under Asymmetric Information : A Simple Reduced-Form Approach
Type
working paper
Date Issued
2008
Author(s)
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 lowtype 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 a¤ect merger decisions.
Language
English
Keywords
Merger
asymmetric information
oligopoly
HSG Classification
contribution to scientific community
Refereed
No
Publisher
University of St. Gallen, Department of Economics Working Paper 2008-15
Subject(s)
Eprints ID
71140
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Name
DP-15-Bo.pdf
Size
257.13 KB
Format
Adobe PDF
Checksum (MD5)
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