Abstract
Information asymmetry creates incentives for firms from different countries to merge. To demonstrate this point, we develop a model of international oligopolistic competition under demand uncertainty and asymmetric information. We show that when domestic firms but not foreign firms are completely informed of local market demands, information sharing enhances the profitability of a merger between a domestic firm and a foreign firm. We also examine how such a merger affects the non-merging firms' profits, consumer surplus and social welfare.
| Original language | English |
|---|---|
| Pages (from-to) | 38-58 |
| Number of pages | 21 |
| Journal | Journal of International Economics |
| Volume | 68 |
| Issue number | 1 |
| Early online date | 21 Jun 2005 |
| DOIs | |
| Publication status | Published - 2006 |
| Externally published | Yes |
Bibliographical note
We benefited from presentations at the Second Chinese Economics Annual Meeting, the Second Biennial Conference of the Hong Kong Economic Association, the International Conferences held in Hitotsubashi University and Kobe University, Mid-west International Economics Meetings and seminars at HKUST and the University of Hong Kong. We thank Steven Chiu, Esther Gal-Or, Hiroshi Ohta and especially Jonathan Eaton (the editor) and the referee for their comments and suggestions.Funding
We are grateful for financial support from the Research Grants Council of Hong Kong (HKUST6214/00H).
Keywords
- International mergers
- Cross-border mergers
- Merger incentives
- Welfare
- Information sharing
- Output coordination