Entry by Merger: Estimates from a Two-Sided Matching Model with Externalities

52 Pages Posted: 12 Dec 2012 Last revised: 6 Nov 2019

See all articles by Kosuke Uetake

Kosuke Uetake

Yale School of Management

Yasutora Watanabe

University of Tokyo - Graduate School of Economics

Date Written: November 4, 2019

Abstract

As firms often acquire incumbents to enter new markets, the presence of desirable targets affects entry and merger decisions simultaneously. We study these decisions jointly by estimating a two-sided matching model with externalities using data on commercial banks to investigate the effect of entry regulation. We exploit the lattice structure of stable allocations and partially identify payoffs including potential (dis)synergies. We find significantly low entry barriers for entry by merger and larger synergies between smaller potential entrants and larger incumbents. Finally, we conduct counterfactual experiments to study the implications of entry by merger on anti-trust policies that regulate forms of entry.

Keywords: Two-Sided Matching, Entry, Merger, Partial-Identification

Suggested Citation

Uetake, Kosuke and Watanabe, Yasutora, Entry by Merger: Estimates from a Two-Sided Matching Model with Externalities (November 4, 2019). Available at SSRN: https://ssrn.com/abstract=2188581 or http://dx.doi.org/10.2139/ssrn.2188581

Kosuke Uetake (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Yasutora Watanabe

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

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