A Game-Theoretic Model of Corporate Takeovers by Major Stockholders
Management Science · 1987 · Volume 33 · Issue 4
Abstract
This paper models the exchange between cash and decision power among all stockholders in a company with two major stockholders. It investigates the feasibility and profitability of corporate takeovers, and shows the existence, under some conditions, of pairs of Nash equilibrium strategies that result in one major stockholder taking control of the company. Finally, it solves for threat-resistant strategies (takeover offers that will not be outbid) for both major players, and concludes with a threat-resistant Nash equilibrium solution to the model.
Keywords
corporate takeover bids, oceanic games, threat-resistant strategies
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