Horizontal Mergers Under Asymmetric Information About Synergies

Hisashi Sawaki

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper analyses a situation in which there are three quantity-setting firms, two of which are considering whether or not to merge. When these two firms have private information about the potential cost-saving synergies of the merger, they may have an incentive to overstate them. This is because if they succeed in making the non-merging rival firm believe that the synergies are high, the rival firm reduces output and the merger becomes more profitable. Under some conditions, anticipating that the rival will form such a belief, low-synergy firms that would never merge under complete information will mimic high-synergy firms by merging. Such pooling behaviour by the merging firms can have a negative impact on social welfare.

Original languageEnglish
Pages (from-to)167-184
Number of pages18
JournalAustralian Economic Papers
Volume54
Issue number3
DOIs
Publication statusPublished - Sep 1 2015

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Horizontal mergers
Asymmetric information
Synergy
Mergers
Merging
Complete information
Social welfare
Incentives
Cost savings
Pooling
Private information

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Horizontal Mergers Under Asymmetric Information About Synergies. / Sawaki, Hisashi.

In: Australian Economic Papers, Vol. 54, No. 3, 01.09.2015, p. 167-184.

Research output: Contribution to journalArticle

Sawaki, Hisashi. / Horizontal Mergers Under Asymmetric Information About Synergies. In: Australian Economic Papers. 2015 ; Vol. 54, No. 3. pp. 167-184.
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