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A general analysis of sequential merger games with an application to cross-border mergers

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  • Salvo, Alberto

Abstract

This paper seeks to uncover why the pattern of equilibria in sequential merger games of a certain type is similar across a fairly wide class of models much studied in the literature. By developing general conditions characterising each element of the set of possible equilibria, I show that the solution to models that satisfy a certain sufficient condition will be restricted to the same subset of equilibria. This result is of empirical relevance in that the pattern of equilibria obtained for this wide class of models is associated with mergers not happening in isolation but rather bunching together. I extend the results to the analysis of cross-border mergers, studying two standard models that satisfy the sufficient condition --Sutton's (1991) vertically-differentiated oligopoly and Perry and Porter's (1985) fixed-supply-of-capital model.

Suggested Citation

  • Salvo, Alberto, 2004. "A general analysis of sequential merger games with an application to cross-border mergers," LSE Research Online Documents on Economics 6732, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6732
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    2. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
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    Cited by:

    1. Fumagalli, Eileen & Vasconcelos, Helder, 2009. "Sequential cross-border mergers," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 175-187, March.
    2. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.
    3. Alberto Salvo, 2010. "Sequential Cross‐border Mergers in Models of Oligopoly," Economica, London School of Economics and Political Science, vol. 77(306), pages 352-383, April.
    4. Vasconcelos, Helder & Fumagalli, Eileen, 2006. "Cross-Border Merger Waves," CEPR Discussion Papers 5601, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Mergers; sequential mergers; cross-border investment; technology transfer;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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