In view of the uncertainty over the ability of merging firms to achieve efficiency gains, we model the post-merger situation as a Cournot oligopoly wherein the outsiders face uncertainty about the merged entity's final cost. At the Bayesian equilibrium, a bilateral merger is profitable provided...

We investigate how rational individuals partition themselves into different coalitions in “hedonic games” (see Banerjee et al. 2001 and Bogomolnaia and Jackson 2002), where individuals' preferences depend solely on the composition of the coalition they belong to. Given that the four solution...