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Cost Uncertainty (cost + uncertainty)
Selected AbstractsMergers with Product Market RiskJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 3 2006Albert Banal-Estaņol This paper studies the causes and the consequences of horizontal mergers among risk-averse firms. The amount of diversification depends on the allocation of shares among the merging firms, with a direct risk-sharing effect and an indirect strategic effect. If firms compete in quantities, consolidation makes firms more aggressive. Mergers involving few firms are then profitable with a relatively low level of risk aversion. With strong enough risk aversion, mergers reduce prices and improve social welfare. If firms instead compete in prices, consumers do not benefit from mergers in markets with demand uncertainty, but can easily benefit with cost uncertainty. [source] Asymmetric Information, Bargaining, and International MergersJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2001Satya P. Das The formation of international mergers is examined in the presence of two kinds of asymmetric information, one when a local firm has private information on market size and the other when a foreign firm has private information on its technology. In each situation, parametric configurations are identified under which a merger offer may or may not be made. It also examines the kind of offer and the probability of its acceptance. The likelihood of a merger beingformed is also related to the basic market size, demand uncertainty, and cost uncertainty. Welfare effects of tax/subsidy policies by the host country are also analyzed. [source] Market Size and the Survival of Foreign-owned Firms,THE ECONOMIC RECORD, Issue 2007ROD FALVEY We develop a general equilibrium model with heterogeneous firms and foreign direct investment cost uncertainty and investigate the survival of foreign-owned firms. The survival probabilities of foreign-owned firms depend on firm-level characteristics, such as productivity, and host country characteristics, such as market size. We show that a foreign-owned firm will be less likely to be shut down when its parent firm's productivity is higher and its indigenous competitors are less productive. Although a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign-owned firms if their parent firms are sufficiently productive. [source] LARGE IS BEAUTIFUL: HORIZONTAL MERGERS FOR BETTER EXPLOITATION OF PRODUCTION SHOCKS,THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 1 2008WEN ZHOU The profitability of horizontal mergers is investigated in a situation in which firms face a production shock and therefore are uncertain about their future costs. I show that, due to production rationalization, small-scale mergers can be profitable if the uncertainty is large. The efficiency gain in production also implies benign welfare consequences. Under cost uncertainty, a profitable merger always improves social welfare if no more than half of the industry's firms are allowed to merge. Finally, I show that the incentives to merge depend on the information structure. Firms are less likely to merge when they possess more information. [source] | ||||||||||