Merger Policy to Promote 'Global Players'? A Simple Model
37 Pages Posted: 28 Sep 2005
Date Written: August 2005
We use a simple framework where firms in two countries serve their respective domestic markets and a world market to analyze under which conditions cost-reducing mergers will be beneficial for the merging firms, the home country, and the world as a whole. For a national merger, the policies enacted by a national merger authority tend to be overly restrictive from a global efficiency perspective. In contrast, all international mergers that benefit the merging firms will be cleared by either a national or a regional regulator, and this laissez-faire approach is also globally efficient. Finally, we derive the properties of the endogenous merger equilibrium.
Keywords: merger policy, international trade
JEL Classification: L41, F13, H77
Suggested Citation: Suggested Citation