Target profits and managerial discipline during the conglomerate merger wave

Article Abstract:

Analysis of mergers and acquisitions in the 'conglomerate merger wave' of 1968-1971-1974 indicates that targeting firms to remove bad management, the 'managerial discipline' theory, was not the motivation in most cases. In the period, according to data on 806 manufacturing sector firm acquisitions, targets of takeovers, whether privately-held or publicly-traded, had profit rates higher than industry averages. In a few acquisitions of big publicly-traded target companies, 'managerial discipline' may have been a major factor, but that appears to be the case for perhaps 5% or less of acquisitions. The author suggests redeployment of assets seeking asset complementarities, according to a sorting model rationalization, may be indicated.

Research, Acquisitions and mergers, Profits, Industrial management, Corporate profits

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Some results of experimental duopoly markets with demand intertia

Article Abstract:

Using price in each period as the only decision variable, a multistage duopoly game was examined and played twice. More cooperative behavior was seen in the second plays, with profits, price stability, and prices being significantly greater. The game involved two firms offering a homogeneous product in 25 market periods, and it was played by subjects recruited from the student population at the University of Bonn, only a few of the players having any earlier knowledge of game theory. Subjects' behavior in the experiment did not conform with prescriptions of the subgame perfect equilibrium.

Models, Marketing, Marketing models, Demand (Economics)

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An experimental test of discount-rate effects on collusive behaviour in duopoly markets

Article Abstract:

Higher rates of discounting are linked to lower likelihood of collusive duopoly equilibria in an experiment using as subjects students at The American University. The experiment was designed to encourage collusion among subjects who acted as sellers in duopoly markets, in the absence of discounting, then to examine the effects of discounting. Investigators found it quite difficult to induce collusive behavior. Results of the experiment indicate support for lower likelihood for collusive behaviour in conditions of high rates of time preference.

Discount rates, Industrial cooperation

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