On Mergers and Agglomeration

14 Pages Posted: 29 Jan 2016

See all articles by Hamid Beladi

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

Reza Oladi

Utah State University - College of Business - Department of Economics

Date Written: February 2016

Abstract

We formulate a model of mergers and acquisitions assuming a monopolistic competitive industry that exhibits agglomeration economies. We provide the conditions for the existence of a non‐trivial Nash equilibrium in the acquisition market at which the most productive firm acquires a range of less‐productive firms. Most importantly, we show that domestic merger and acquisition activities are international trade promotionary. We also show that such types of mergers and acquisition will improve the competitive position of foreign firms leading to an increase in their market share. In addition, domestic mergers and acquisitions will increase the number of imported varieties.

Suggested Citation

Beladi, Hamid and Oladi, Reza, On Mergers and Agglomeration (February 2016). Review of Development Economics, Vol. 20, Issue 1, pp. 345-358, 2016. Available at SSRN: https://ssrn.com/abstract=2724299 or http://dx.doi.org/10.1111/rode.12223

Hamid Beladi (Contact Author)

University of Texas at San Antonio - College of Business - Department of Economics ( email )

One UTSA Circle
P.O. Box 5636
San Antonio, TX 78249
United States
210-458-7038 (Phone)
210-458-7040 (Fax)

Reza Oladi

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States

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