Code Creation in Endogenous Merger Experiments

16 Pages Posted: 29 Mar 2010  

Lauren Feiler

affiliation not provided to SSRN

Colin Camerer

California Institute of Technology - Division of the Humanities and Social Sciences

Abstract

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".

JEL Classification: D23, D83, G34, L21, M14

Suggested Citation

Feiler, Lauren and Camerer, Colin, Code Creation in Endogenous Merger Experiments. Economic Inquiry, Vol. 48, Issue 2, pp. 337-352, April 2010. Available at SSRN: https://ssrn.com/abstract=1578516 or http://dx.doi.org/10.1111/j.1465-7295.2009.00200.x

Lauren Feiler (Contact Author)

affiliation not provided to SSRN

No Address Available

Colin F. Camerer

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States
626-395-4054 (Phone)
626-432-1726 (Fax)

Paper statistics

Downloads
2
Abstract Views
318