Merger Negotiations and Ex-Post Regret

We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post mechanisms, which use both players’ reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.Mergers, Mechanism Design, Asymmetric Information, Interdependent Valuations, Efficient Mechanisms

Why Bayes Rules: A Note on Bayesian vs. Classical Inference in Regime Switching Models

By means of a very simple example, this note illustrates the appeal of using Bayesian rather than classical methods to produce inference on hidden states in models of Markovian regime switching.Bayesian analysis, switching regression, regime changes, nonlinear filtering

EU Competition Policy Revisited: Economic Doctrines Within European Political Work

European Union competition policy is often described as neoliberal, without this leading to more investigation. This paper highlights how the European Competition policy doctrine has been shaped, how the ordoliberal movement and the Chicago school ideas have been implemented and supported by the political work of some key actors. We show that, contrary to what is sometimes said in literature, ordoliberal actors were neither hegemonic nor leaders between Rome Treaty and the eighties, even if some neoliberal principles were introduced in antitrust law. These laws are much more a compromise between French and German representatives, and between neo-mercantilists and ordoliberals. However, things have dramatically changed since the eighties, when both (1) new political work from members of the Commission introduced in the European competition policy elements of Chicago School doctrine to complete the European market and (2) some decisions from the ECJ clarified the doctrine of EU Competition law. Nowadays, European competition policy is a mix between an ordoliberal spirit and some Chicago School doctrinal elements.competition, policy, European Union, neoliberalism, ordoliberalism, political work

Horizontal mergers with synergies: first-price vs. profit-share auction

We consider takeover bidding in a Cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target. Two auction rules are considered: standard first-price and profit-share auctions, supplemented by entry fees. Since non-merged firms benefit from a merger if the synergies are low, bidders are subject to a positive externality. Nevertheless, pooling does not occur; and the profit-share auction is strictly more profitable than the first-price auction, regardless of whether firms observe the synergy parameter or only the winning bid before they play the oligopoly game

Horizontal mergers with synergies: first-price vs. profit-share auction

We consider takeover bidding in a Cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target. Two auction rules are considered: standard first-price and profit-share auctions, supplemented by entry fees. Since non-merged firms benefit from a merger if the synergies are low, bidders are subject to a positive externality. Nevertheless, pooling does not occur; and the profit-share auction is strictly more profitable than the first-price auction, regardless of whether firms observe the synergy parameter or only the winning bid before they play the oligopoly game.Horizontal mergers; takeovers; auctions; externalities; oligopoly

Designing and Enforcing Preliminary Agreements

Preliminary agreements—variously labeled as memoranda of understanding, letters of intent, term sheets, commitment letters, or agreements in principle—are common in complex business transactions. They document an incomplete set of terms that the parties have agreed upon, while anticipating further negotiation of the remaining provisions. They often create legal obligations, particularly a duty to negotiate in good faith. This duty has been the subject of a substantial number of judicial opinions over the past few decades and yet continues to be regarded as a confusing and unpredictable issue in contract law. Legal scholarship is hamstrung in its analysis of the case law because it has focused on only one purpose for this good faith duty: protecting the parties’ reliance investments in the bargaining process. This Article broadens the analysis by introducing multiple goals that parties may seek in imposing legal obligations on their negotiation process and by shifting the focus to what the courts have identified as a necessary feature of the duty to negotiate in good faith: the expectation of some fidelity to the agreed-upon terms specified in the preliminary agreement. The ease with which the parties may deviate from these terms in their negotiations is the essence of the good faith standard. Once parties have searched for and chosen their respective contracting partner, they need the incentives and flexibility to tailor and optimize the terms of their deal while also efficiently constraining value-claiming behavior and allocating exogenous risks. The recognition of such broader objectives (beyond protection of reliance investments) allows us also to justify how and why courts are willing to enforce the obligation with the more robust remedy of expectation damages instead of the reliance damages that are advocated by prior scholarship. We show that, by choosing whether to agree to a duty to negotiate (in good faith or otherwise) and by selecting the appropriate damages measure, the parties can achieve the desired level of “stickiness” while addressing concerns about the uncertainty of a flexible legal standard such as good faith

The Crescent - February 1, 1963

Volume 75, Number 6ahttps://digitalcommons.georgefox.edu/the_crescent/1729/thumbnail.jp

Afterword: The Linkage Problem – Comments on Five Texts

The problem of linkage between non trade subjects and the World Trade Organization is certainly one of the most pressing and challenging policy puzzles for international economic relations and institutions today. It is extensively and harshly debated by political leaders and diplomats, at both the national and the international levels of discourse, and is one of several issues that derailed the WTO Third Ministerial Conference in Seattle in late 1999. It also posed problems for the Fourth Ministerial Conference in Doha, Qatar, in November of 2001, and it threatens to derail the successful functions of the WTO itself. With the ambitious topic assigned to them, the five authors, or groups of authors, have labored heroically to address the problem. The task assigned to me and to some others is to comment on these works. Partly because of time and space constraints, I will not try to deal very much with each work individually but will focus on some overall characteristics of these works and of the subject generally

Competition Policy in Switzerland

This paper provides a critical review of competition policy in Switzerland. We analyse the legal statute, the institutional arrangements for its implementation and the case law since 1985.competition policy, Switzerland; political economy

Entry in liberalized railway markets: The German experience

In Germany, competitive franchising is increasingly being used to procure passenger railway services that were previously provided by a state monopolist. This paper analyzes the 77 tenders that have taken place since the railway reform in 1994. The tenders differ with respect to the size of the franchise network, the required frequency of service, the duration of the contract and the proximity to other lines that are already run by competitors of DB Regio, a subsidiary of the successor of the former state monopolist. Our analysis shows that larger networks are less likely to be won by the competitors. Also, more recent auctions have been won by competitors more frequently than earlier auctions. Other control variables such as the duration of the contract and the adjacency to other lines run by entrants are insignificant.Competition for the market, liberalization, passenger railways, procurement auctions