Cross-Border Merger Waves
University of Bocconi
Universidade do Porto - Faculdade de Economia (FEP)
CEPR Discussion Paper No. 5601
This paper proposes a sequential merger formation game with cost synergies to study how trade policy can influence firms' choice between domestic and cross-border mergers in an international Cournot oligopoly. We find that the equilibrium market structure depends heavily on: (i) the level of trade costs; and (ii) whether or not active antitrust authorities are incorporated within the sequential merger game. In addition, it is shown that whenever mergers occur in equilibrium, they occur in waves and the merger wave comprises at least one cross-border merger. We also analyze how the equilibrium market structures are affected by the presence of lobbying efforts.
Number of Pages in PDF File: 34
Keywords: Endogenous mergers, merger waves, tariff-jumping FDI
JEL Classification: F10, F13, L13, L41working papers series
Date posted: June 29, 2006
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