Working Paper No. 516

Predation and Mergers: Is Merger Law Counterproductive?

Published: July 2, 1999Pages: 34Keywords: Mergers; Predation; Merger law, Failing Firm DefenseJEL-codes: K21; L12; L41

Predation and Mergers: Is Merger Law Counterproductive? Lars Persson

This paper studies the interaction between the incentives for predation and mergers. I show that the incentive for predation in an oligopoly is limited by the subsequent competition for the prey. This bidding competition is especially fierce when the prey's assets exert strong negative externalities on rivals. Firms may therefore prefer to predate to destroy the prey's assets, rather than just its financial viability. The paper also demonstrates that predation may be preferred to an immediate merger for two reasons. First, by predating, firms may share the costs of eliminating a rival and circumvent the free-riding problem associated with mergers, and second, destructive predation helps firms avoid the bidding competition. It is also shown that a restrictive merger policy may be counterproductive, since it may increase the incentives for predation by helping predators avoid the bidding competition. Moreover, the incentive for predation under the US failing firm defense might be even stronger, since it allows mergers but limits the bidding competition.

Lars Persson


Ph: +46 8 665 4504

Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

Sick of Inequality.jpg

In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


Seminars organized by IFN


To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 |