The Merger-Paradox: A Tournament-Based Solution

Fan, Cuihong und Wolfstetter, Elmar G. (August 2014): The Merger-Paradox: A Tournament-Based Solution. SFB/TR 15 Discussion Paper No. 478

Abstract

According to the well-known “merger paradox”, in a Cournot market game mergers are generally unprofitable unless most firms merge. The present paper proposes an optimal merger mechanism. With this mechanism mergers are never unprofitable, more profitable than in other known mechanism, and in many cases welfare increasing. The proposed mechanism assumes that merged firms continue to operate as independent subsidiaries that are rewarded according to a simple and commonly observed relative performance measure.

• Dokumententyp: Paper
• Keywords: Mergers, multi-divisional firms, tournaments, industrial organization.
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A7 - Auktionen, Anreizprobleme und Wettbewerb
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: L00, D4
• Sprache: Englisch