Profiting from Induced Changes in Competitors' Market Values: The Case of Entry and Entry Deterrence.

The authors resurrects an idea due to J. Hirshleifer (1971) by examining how one firm might profit by trading in the securities of other firms whose values are dependent upon the first firm's actions. They focus on the case of entry: can an entrant profit from trading in the securities of an incumbent firm and how does the availability of such trading profits affect the economics of entry and entry deterrence? The authors' results have implications for antitrust policy, insider trading rules, the Williams Act, short selling rules, whether companies should be publicly or privately held, and the degree of diversification for companies. Copyright 1995 by Blackwell Publishing Ltd.