
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.
Item Type: | Paper |
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Keywords: | Mergers, multi-divisional firms, tournaments, industrial organization. |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A7 - Auktionen, Anreizprobleme und Wettbewerb |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | L00, D4 |
URN: | urn:nbn:de:bvb:19-epub-21466-2 |
Language: | English |
Item ID: | 21466 |
Date Deposited: | 18. Sep 2014, 08:49 |
Last Modified: | 04. Nov 2020, 13:02 |