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- Publisher
- de Gruyter
- Copyright
- Copyright © 2014 by the
- ISSN
- 2194-6108
- eISSN
- 1935-1682
- DOI
- 10.1515/bejeap-2013-0101
- Publisher site
- See Article on Publisher Site
Abstract
Abstract We look at a concentrated market structure to determine the more likely merger when firms are initially asymmetric. A feature of the analysis is that a high cost firm participating in a merger can learn from the low cost participant. The determination of the equilibrium ownership structure (EOS) rests on the size of the cost asymmetries and learning abilities. Using an endogenous merger model, we find that the EOS always involves a merger between the two most efficient firms. This result holds whether firms adopt a decentralized or centralized structure post-merger and whether learning abilities are known or uncertain pre-merger. In most cases, welfare increases after the merger.
Journal
The B.E. Journal of Economic Analysis & Policy – de Gruyter
Published: Jul 1, 2014