Faculty of Economics and Business Administration Publications Database

The Incentives for Takeover in Oligopoly

Wey, Christian
Volume: 22
Number: 8-9
Pages: 1067 - 1089
Month: November
ISSN-Print: 0167-7187
Link External Source: Online Version
Year: 2004
Keywords: Takeover bidding; Merger incentives; Oligopoly; Cournot; Bertrand
Abstract: We present a model of takeover where the target optimally sets its reserve price. Under relatively standard symmetry restrictions, we obtain a unique equilibrium. The probability of takeover is only a function of the number of firms and of the insiders’ share of total industry gains due to the increase in concentration. Our main application is to the linear Cournot and Bertrand models. A takeover is more likely under Bertrand competition if goods are substitutes, and more likely under Cournot competition if goods are complements.