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Sequential cross-border mergers

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  • 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. 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.
  2. Nilssen, T. & Sogard, L., 1995. "Sequential Horizontal Mergers," Papers 04-95, Norwegian School of Economics and Business Administration-.
  3. Neary, J Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," CEPR Discussion Papers 4325, C.E.P.R. Discussion Papers.
  4. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  5. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
  6. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
  7. Motta, Massimo & Vasconcelos, Helder, 2004. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," CEPR Discussion Papers 4175, C.E.P.R. Discussion Papers.
  8. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  9. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  10. Norbäck, Pehr-Johan & Persson, Lars, 2002. "Cross-Border Acquisitions and Greenfield Entry," Working Paper Series 570, Research Institute of Industrial Economics.
  11. Fridolfsson, Sven-Olof, 2007. "Anti- versus Pro-Competitive Mergers," Working Paper Series 694, Research Institute of Industrial Economics.
  12. Horn, Henrik & Persson, Lars, 1996. "Endogenous Mergers in Concentrated Markets," CEPR Discussion Papers 1544, C.E.P.R. Discussion Papers.
  13. 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.
  14. Volker Nocke & Stephen Yeaple, 2004. "An Assignment Theory of Foreign Direct Investment," NBER Working Papers 11003, National Bureau of Economic Research, Inc.
  15. 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.
  16. repec:ant:wpaper:1999018 is not listed on IDEAS
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Citations

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Cited by:
  1. 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.
  2. Matsushima Noriaki & Sato Yasuhiro & Yamamoto Kazuhiro, 2013. "Horizontal Mergers, Firm Heterogeneity, and R&D Investments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 959-990, August.
  3. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Discussion Paper 2014-006, Tilburg University, Center for Economic Research.
  4. Olivier Bertrand & Marie-Ann Betschinger, 2011. "Performance of domestic and cross-border acquisitions: empirical evidence from Russian acquirers," Working Papers 129, European Bank for Reconstruction and Development, Office of the Chief Economist.
  5. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
  6. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.

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