Sandro Brusco (Department of Economics, SUNY at Stony Brook, and Departamento de Economía de la Empresa, Universidad Carlos III de Madrid) Giuseppe Lopomo (The Fuqua School of Business, Duke University) S. Viswanathan (The Fuqua School of Business, Duke University)
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A firm can merge with one of n potential partners. The owner of each firm has private information about both his firm’s stand-alone value and a component of the synergies that would be realized by the merger involving his firm. We characterize incentive-efficient mechanisms in two cases. First, we assume that the value of any newly formed partnership is verifiable, hence transfers can be made contingent on the new information accruing after the merger. Second, we study the case of uncontingent rules. In the first case, we show that it is not optimal, in general, to redistribute shares of non-merging firms, and identify necessary and sufficient conditions for the implementability of efficient merger rules. In the second case, we show that the first-best can be obtained i) always, if the synergy values are privately known but the firms’ stand-alone values are observable; ii) only with sufficiently large synergies, if the firms’ stand-alone are privately known; and iii) never, if the set of feasible mechanisms is restricted to “auctions in shares”.
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Publisher Info
Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
2004.7.
Sandro Brusco & Giuseppe Lopomo & S Viswanathan, 2004.
"Merger Mechanisms,"
Levine's Bibliography
122247000000000379, UCLA Department of Economics.
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D44 - Microeconomics - - Market Structure and Pricing - - - Auctions G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Roger B. Myerson, 1978.
"Optimal Auction Design,"
Discussion Papers
362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Albert Banal-Estañol & Jo Seldeslachts, 2005.
"Merger Failures,"
CIG Working Papers
SP II 2005-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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