Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 777: Getting a Better Price: Strategic Behaviour before Changes in Ownership of Corporate Assets

Richard Friberg (), Pehr-Johan Norbäck () and Lars Persson ()
Additional contact information
Richard Friberg: Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm, Sweden
Pehr-Johan Norbäck: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We propose a model of investments prior to corporate ownership changes. We derive conditions under which the selling of a firm triggers overinvestment by both the seller and the buyer prior to the asset transfer. In a setting with Cournot competition, we show that these incentives can drive the consumer prices in a post-acquisition duopoly below those of an ongoing triopoly. Our analysis warns against a mechanical use of pre-merger benchmarks in ex post merger evaluations.

Keywords: Mergers & Acquisitions; Ownership; Auctions; Strategic Investments; Merger Evaluations

JEL-codes: L13; L40; L66

34 pages, November 13, 2008

Full text files 

wp777.pdf PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:12:19.