Competition, Cascades and Connectivity: A Multi-Market Model of Endogenous Mergers
نویسنده
چکیده
There is an increasing trend towards global financial consolidation. Empirical evidence has shown that though consolidation can promote market efficiency, it can also increase systemic risk. Therefore, understanding the effects of company mergers on the financial markets is an increasingly pertinent issue. This paper presents a multi-market agent-based model of endogenous merger formation, consistent with empirical analyses of UK merger data. The conditions under which market competition is sufficiently disrupted to prompt endogenously-created merger waves are identified. It is also shown how dependencies between markets can cause destabilising effects to propagate throughout the entire multi-market world. Keywords— Cournot competition, agent-based simulation, endogenous mergers, emergent behaviour, merger waves, systemic risk, cascade behaviour, economic networks. JEL Classification Codes— C63, D21, G34. 1This work was supported by an EPSRC Doctoral Training Centre grant (EP/G03690X/1). 1
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