Abstract
We develop a model of endogenous mergers to study their dynamic process. Firms choose whether, when, and with whom to merge. Two necessary conditions are identified for mergers to occur: firm heterogeneity and negative demand shocks. We show that mergers are strategic complements and therefore tend to occur in waves. Moreover, some mergers occur for strategic reasons in order to precipitate further mergers.
| Original language | English |
|---|---|
| Pages (from-to) | 214-226 |
| Number of pages | 13 |
| Journal | RAND Journal of Economics |
| Volume | 38 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Mar 2007 |
| Externally published | Yes |
Funding
Financial support from the Research Grants Council of Hong Kong (HKUST6428/05H).