Merging to Second Best

Joshua Wright September 3, 2008

Truth on the Market View Original Source

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Luke Froeb, Mikhael Shor and Steven Tschantz have just posted an interesting looking model of mergers in auction settings where the incumbent firm has an advantage in subsequent auctions. The model captures the intuition that sometimes a mergers creating a “second-best” rival can result in more more aggressive bidding and result in lower prices even if the merger does not create efficiencies.

Read the full piece here.