Horizontal Mergers Under Asymmetric Information About Synergies

Hisashi Sawaki

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


This paper analyses a situation in which there are three quantity-setting firms, two of which are considering whether or not to merge. When these two firms have private information about the potential cost-saving synergies of the merger, they may have an incentive to overstate them. This is because if they succeed in making the non-merging rival firm believe that the synergies are high, the rival firm reduces output and the merger becomes more profitable. Under some conditions, anticipating that the rival will form such a belief, low-synergy firms that would never merge under complete information will mimic high-synergy firms by merging. Such pooling behaviour by the merging firms can have a negative impact on social welfare.

Original languageEnglish
Pages (from-to)167-184
Number of pages18
JournalAustralian Economic Papers
Issue number3
Publication statusPublished - Sept 1 2015

ASJC Scopus subject areas

  • General Economics,Econometrics and Finance


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