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

49 Pages Posted: 12 Dec 2012 Last revised: 15 Nov 2018

See all articles by Kosuke Uetake

Kosuke Uetake

Yale School of Management

Yasutora Watanabe

University of Tokyo - Graduate School of Economics

Date Written: October 24, 2018

Abstract

As firms often acquire incumbents to enter new markets, presence of desirable targets affects entry and merger decisions simultaneously. We study these decisions jointly by considering a two-sided matching model with externalities and estimate it using data on commercial banks to investigate the effect of entry deregulation. Our estimation strategy exploits the lattice structure of stable allocations to construct moment inequalities and identify payoffs including potential (dis)synergies. We find greater merger synergies between smaller potential entrants and larger incumbents, and varying entry barriers by mode of entry. By prohibiting de novo entry, our counterfactual quantifies the effect of the deregulation.

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 (October 24, 2018). 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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