Asymmetric information, bargaining, and international mergers

The formation of international mergers is examined in the presence of two k inds of asymmetric information, one when a local firm has private informati on on market size and the other when a foreign firm has private information on its technology. In each situation, parametric configurations are identi fied under which a merger offer may or may not be made. It also examines th e kind of offer and the probability of its acceptance. The likelihood of a merger being formed is also related to the basic market size, demand uncert ainty, and cost uncertainty. Welfare effects of tax/subsidy policies by the host country are also analyzed.