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.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
