According to the well-known "merger paradox", in a Cournot market game mergers are generally unprofitable unless most firms merge. The present paper proposes an optimal merger mechanism. With this mechanism mergers are never unprofitable, more profitable than in other known mechanism, and in...

This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach of the supplier, but the best approach is unknown. Diversity of approaches is beneficial because of the resulting option value. An auction induces the social optimum, while a...