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Sweetening the Pill: A Theory of Waiting To Merge

Eileen Fumagalli


Tore Nilssen

University of Oslo - Department of Economics

January 12, 2016

Merger policy is a permission-granting activity by government in which there may be disincentives to seek permission because of the benefit from having other firms merge. We set up a sequential merger game with endogenized antitrust policy to study these disincentives. In particular, we delineate a pill-sweetening motive for waiting to merge: a firm may choose to let other firms move first, in order to get more mergers approved. We report the prevalence of this and other motives for not merging at once and find it to hinge on efficiency gains from a merger, differently-sized firms, firms' production technology, the presence of an antitrust authority, and the alignment of interests between antitrust authorities and firms.

Number of Pages in PDF File: 39

Keywords: Mergers, Antitrust policy

JEL Classification: L11, L13, L41, G34

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Date posted: August 18, 2008 ; Last revised: January 12, 2016

Suggested Citation

Fumagalli, Eileen and Nilssen, Tore, Sweetening the Pill: A Theory of Waiting To Merge (January 12, 2016). Available at SSRN: https://ssrn.com/abstract=1233503 or http://dx.doi.org/10.2139/ssrn.1233503

Contact Information

Eileen Fumagalli
Konkurransetilsynet ( email )
P.O. Box 439 Sentrum
NO- 5805 Bergen
+47 55 59 75 33 (Phone)
Tore Nilssen (Contact Author)
University of Oslo - Department of Economics ( email )
P.O. Box 1095 Blindern
N-0317 Oslo
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