Horizontal mergers with synergies: : Cash vs. profit-share auctions

• Autores: Wei Ding, Cuihong Fan, Elmar G. Wolfstetter
• Localización: International journal of industrial organization, ISSN 0167-7187, Vol. 31, Nº. 5, 2013, págs. 382-391
• Idioma: inglés
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• Resumen

  • We consider takeover bidding in a Cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target and bidders can influence rivals' beliefs through their bids. We compare cash and profit-share auctions, first- and second-price, supplemented by entry fees. Since non-merged firms benefit from a merger if synergies are low, bidders are subject to a positive externality with positive probability; nevertheless, pooling does not occur. Unlike cash auctions, profit-share auctions are not revenue equivalent, and the second-price profit-share auction is more profitable than the other auctions.