21 Pages Posted: 20 Jun 2013
Date Written: July 2013
We investigate the antitrust authority's optimal merger policy in a duopoly model with cost asymmetry and asymmetric information regarding uncertain demand. Technology can be transferred either through a merger or a license, while market information is shared only through a merger. We show that the optimal merger policy differs under Cournot and Bertrand competition. If firms compete in Bertrand fashion, then mergers should never be allowed. If firms compete in Cournot fashion, then mergers are permitted if market volatility is high or if volatility is in the intermediate range and the size of innovations is large enough.
Suggested Citation: Suggested Citation
Shieh, Shiou and Huang, Chi-Fei and Chen, Hsiao-Chi, To Merge or to License: Implications of Information Sharing for Optimal Merger Policy (July 2013). The Manchester School, Vol. 81, Issue 4, pp. 599-619, 2013. Available at SSRN: https://ssrn.com/abstract=2282327 or http://dx.doi.org/10.1111/j.1467-9957.2012.02301.x
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