Abstract
The authors develop a Cournot oligopoly model of an industry with a potential entrant. Entry into the industry can be effected either directly or through acquisition of an incumbent. They establish the existence of an equilibrium in which the types of potential entrant differentiate themselves by the entry strategy chosen. A takeover offer generated by this behavior reveals information to the capital markets, which respond in a manner consistent with the empirical evidence by driving up the value of the targeted incumbent and driving down the value of the bidding entrant. Copyright 1994 by University of Chicago Press.
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