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Sequential cross-border mergers

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Author Info

  • Fumagalli, Eileen
  • Vasconcelos, Helder

Abstract

This paper proposes a sequential merger formation game to study how trade policy can influence firms' choice between intra-national and cross-border mergers in an international Cournot oligopoly with a cost structure à la Perry and Porter [Perry, M. and Porter, R.H., 1985. Oligopoly and the Incentive for Horizontal Merger. American Economic Review 75(1), 219-227.]. 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.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 175-187

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Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:175-187

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Endogenous mergers Merger policy Tariff-jumping FDI Endogenous split of surplus;

References

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  1. Volker Nocke & Stephen Yeaple, 2004. "An Assignment Theory of Foreign Direct Investment," NBER Working Papers 11003, National Bureau of Economic Research, Inc.
  2. Fridolfsson, Sven-Olof, 2007. "Anti- versus Pro-Competitive Mergers," Working Paper Series 694, Research Institute of Industrial Economics.
  3. Horn, Henrik & Persson, Lars, 1996. "Endogenous Mergers in Concentrated Markets," CEPR Discussion Papers 1544, C.E.P.R. Discussion Papers.
  4. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
  5. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "The Effects of Mergers: An International Comparison," CIG Working Papers FS IV 01-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. Massimo MOTTA & Helder VASCONCELOS, 2003. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," Economics Working Papers ECO2003/23, European University Institute.
  7. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  8. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  9. Nilssen, T. & Sogard, L., 1995. "Sequential Horizontal Mergers," Papers 04-95, Norwegian School of Economics and Business Administration-.
  10. Fridolfsson S.O. & Stennek J., 1999. "Why mergers reduce profits, and raise share prices: A theory of preemptive mergers," Working Papers 1999018, University of Antwerp, Faculty of Applied Economics.
  11. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1229-1257.
  12. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  13. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  14. Sven-Olof Fridolfsson & Johan Stennek, 2001. "Why Mergers Reduce Profits and Raise Share Prices: A Theory of Preemptive Mergers," CIG Working Papers FS IV 01-26, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  15. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  16. Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
  17. Norbäck, Pehr-Johan & Persson, Lars, 2002. "Cross-Border Acquisitions and Greenfield Entry," Working Paper Series 570, Research Institute of Industrial Economics.
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Citations

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Cited by:
  1. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
  2. Noriaki Matsushima & Yasuhiro Sato & Kazuhiro Yamamoto, 2009. "Horizontal mergers, firm heterogeneity, and R&D investments," ISER Discussion Paper 0754, Institute of Social and Economic Research, Osaka University.
  3. Nakamura, Yasuhiko, 2011. "Bargaining over managerial delegation contracts and merger incentives in an international oligopoly," Research in Economics, Elsevier, vol. 65(1), pages 47-61, March.
  4. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.
  5. Bertrand, Olivier & Betschinger, Marie-Ann, 2012. "Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 413-437.
  6. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Discussion Paper 2014-006, Tilburg University, Center for Economic Research.

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