Publication
Title
Merger incentives and the failing firm defense
Author
Abstract
The merger incentives between profitable firms differ fundamentally from the incentives of a profitable firm to merge with a failing firm. We investigate these incentives under different modes of price competition and Cournot behavior. Our main finding is that firms strictly prefer exit of the failing firm to acquisition. This result may imply that other than strategic reasons, like economies of scale, must be looked for to understand why firms make use of the failing firm defense. However, when products are sufficiently heterogenous, we find that (i) the failing firm defense can be welfare enhancing and (ii) a government bail-out increases total welfare when the number of firms is sufficiently low.
Language
English
Source (journal)
The journal of industrial economics. - Oxford
Publication
Oxford : 2014
ISSN
0022-1821 [print]
1467-6451 [online]
Volume/pages
62:3(2014), p. 436-466
ISI
000341777100003
Full text (Publishers DOI)
Full text (open access)
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UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 06.11.2014
Last edited 15.05.2017
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