The Incentives for Takeover in Oligopoly
University of Frankfurt; Imperial College London
University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)
CEPR Discussion Paper No. 3163
This Paper presents a model of takeover incentives in an oligopolistic industry, which, in contrast to previous approaches, takes both insiders' and outsiders' gains from an increase in industry concentration into account. Our main application is to compare takeover incentives in a differentiated Cournot and Bertrand oligopoly model with linear demand and costs. We provide a complete analysis for arbitrary numbers of firms, complements and substitutes, and degrees of product differentiation. An increase in concentration is more likely under Cournot competition if products are complements and more likely under Bertrand competition if products are substitutes. Moreover, as products become closer substitutes, a takeover becomes more likely under Bertrand and less likely under Cournot competition.
Number of Pages in PDF File: 42
Keywords: Merger, takeover bidding, oligopoly
JEL Classification: D43, D44, L10, L41working papers series
Date posted: February 8, 2002
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.875 seconds