Game Model Construction And Empirical Analysis Of Merger Motivation In Oligopoly Market

Empirical studies show that horizontal mergers often makes the combined company’s total operating profit decline, but the stock rose. At first glance this is a paradox, because if operating profit (profitability) decreased, and assuming the long term market efficiency, then the share price (market value) should be consistent with the direction of change. This is theoretically a paradox, or an empirical mystery. Because the subject from different markets empirical study time period also varies, but surprisingly identical conclusions.Empirical results tend to produce a problem that first, since the merged company cannot make a better income, then why it happened? Second, how the combined company valuation? Why the decline in profitability of the company’s will result a better market price?This paper attempts from the most classic oligopoly models and analyzes the trend of the value of the company before and after mergers and acquisitions to determine the most original companies motives choose to merger. It tried using mathematical models to classify different motives of companies, trying to assume a rational person explain why some mergers and acquisitions under the premise of not profitable indeed still occur.