Code Creation in Endogenous Merger Experiments
affiliation not provided to SSRN
California Institute of Technology - Division of the Humanities and Social Sciences
Economic Inquiry, Vol. 48, Issue 2, pp. 337-352, April 2010
We study the conflict that can occur in a merger due to firms' use of specialized language, or "code", and whether participants accurately forecast this difficulty. After creating a shared code to describe different pictures accurately, subjects bid for extra payments to join a merged group. The two lowest bidders are placed in the merged group. Values inferred from two different bidding procedures indicate fairly accurate general appraisals of the cost of the merger, but the values of those subjects who bid the least, and choose to join the merged group, are too optimistic, reflecting an "organizational winner's curse".
Number of Pages in PDF File: 16
JEL Classification: D23, D83, G34, L21, M14
Date posted: March 29, 2010