Cross-Border Mergers and Market Segmentation

CentER Discussion Paper Series No. 2011-112

TILEC Discussion Paper No. 2011-047

33 Pages Posted: 3 Sep 2010 Last revised: 26 Oct 2011

Amrita Ray Chaudhuri

University of Winnipeg - Department of Economics; Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg Law and Economics Center (TILEC)

Date Written: October 19, 2011

Abstract

This paper shows that cross-border mergers are more likely to occur in industries which serve multiple segmented markets rather than a single integrated market, given that cost functions are strictly convex. The product price rises in the market where an acquisition is made but falls in the other, decreasing the acquisition price of other firms (in contrast to the results in the existing merger literature on integrated markets). Although the sum of consumer surplus across the countries may rise in response to a given acquisition, one of the countries gains at the expense of the other.

Keywords: cross-border mergers, endogenous mergers, competition policy, Cournot competition

JEL Classification: L12, L40, L41, F15, F23

Suggested Citation

Ray Chaudhuri, Amrita, Cross-Border Mergers and Market Segmentation (October 19, 2011). CentER Discussion Paper Series No. 2011-112; TILEC Discussion Paper No. 2011-047. Available at SSRN: https://ssrn.com/abstract=1670624 or http://dx.doi.org/10.2139/ssrn.1670624

Amrita Ray Chaudhuri (Contact Author)

University of Winnipeg - Department of Economics ( email )

Winnipeg, Manitoba R3B 2E9
Canada

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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