Waiting to Merge

Abstract:     
We set up a sequential merger game to study a firm's incentives to pass up on an opportunity to merge with another firm. We find that such incentives may exist when there are efficiency gains from a merger, firms are of different sizes, there is an antitrust authority present to approve mergers, and there is a sufficient alignment of interests between the antitrust authority and the firms. We point out three distinct motives for not merging: the external-effect motive, the bargaining-power motive, and the pill-sweetening motive.

Number of Pages in PDF File: 33

Keywords: Mergers, Antitrust policy

JEL Classification: L11, L13, L41, G34

working papers series