In hunt for size: merger formation in the oil industry

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Dokumentart: WorkingPaper
Date: 2003
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 258
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Erdölindustrie , Fusion , Mineralölindustrie
Other Keywords:
Asymmetric horizontal mergers , Coalition formation , Oil industry
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This paper analyzes the recent mergers in the oil industry. Oil is assumed to be a homogeneous good which is produced by a small number of firms with different unit costs. Merger formation is endogenously explained as a result of cooperative decisions. We show that the mergers are amongst very asymmetric firms if initial size differences are moderate. If size differences are large, however, the more efficient firms participate in the mergers, while the least efficient firms are not attractive partners and, therefore, remain independent in the post-merger market.

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