Merger Negotiations and Ex-Post Regret

Dennis Gaertner () and Armin Schmutzler
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Dennis Gaertner: Socioeconomic Institute, University of Zurich
Authors registered in the RePEc Author Service: Dennis L. Gärtner ()

No 607, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post mechanisms, which use both players� reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.

Keywords: Mergers; Mechanism Design; Asymmetric Information; Interdependent Valuations; Efficient Mechanisms (search for similar items in EconPapers)
JEL-codes: D82 G34 L10 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-09, Revised 2007-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-fin and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published in Journal of Economic Theory 144 (2009), pp. 1636-1664

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https://www.zora.uzh.ch/id/eprint/52367/1/wp0607.pdf revised version, 2007 (application/pdf)

Related works:
Journal Article: Merger negotiations and ex-post regret (2009)
Working Paper: Merger Negotiations and Ex-Post Regret (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0607

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