Anti-competitive mergers benefit competitors more than the merging firms. We show that such externalities reduce firms' incentives to merge (a hold-up mechanism). Firms delay merger proposals, thereby foregoing valuable profits and hoping other firms will merge instead - a war of attrition. The...

We explain the empirical puzzle why mergers reduce profits, and raise share prices. If being an 'insider' is better than being an 'outsider', firms may merge to preempt their partner merging with a rival. The stock-value is increased, since the risk of becoming an outsider is eliminated. We also...

Anticompetitive mergers benefit competitors more than the merging firms. We show that such externalities reduce firms' incentives to merge (a holdup mechanism). Firms delay merger proposals, thereby foregoing valuable profits and hoping other firms will merge instead - a war of attrition. The...

Anticompetitive mergers increase competitors' profits, since they reduce competition. Using a model of endogenous mergers, we show that such mergers nevertheless may reduce the competitors' share-prices. Thus, event-studies can not detect anti-competitive mergers.

We demonstrate a 'preemptive merger mechanism' which may explain the empirical puzzle why mergers reduce profits, and raise share prices. A merger may confer strong negative externalilties on the firms outside the merger. If being an 'insider' is better than being an 'outsider', firms may merge...

We explain the empirical puzzle why mergers reduce profits and raise share prices. If being an “insider” is better than being an “outsider,” firms may merge to preempt their partner merging with a rival. The stock-value of the insiders is increased, since the risk of becoming an outsider...

There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that...