Merger Negotiations and Ex-Post Regret

Armin Schmutzler and Gärtner, Dennis
Authors registered in the RePEc Author Service: Dennis L. Gärtner ()

No 5911, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post mechanisms, which use both players' reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.

Keywords: Mergers; Mechanism design; Asymmetric information; Interdependent valuations; Efficient mechanisms (search for similar items in EconPapers)
JEL-codes: D82 G34 L10 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-bec and nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP5911 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Merger negotiations and ex-post regret (2009)
Working Paper: Merger Negotiations and Ex-Post Regret (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5911

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5911

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().