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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. repec:ant:wpaper:1999018 is not listed on IDEAS
  2. Volker Nocke & Stephen Yeaple, 2004. "An Assignment Theory of Foreign Direct Investment," PIER Working Paper Archive 05-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Massimo MOTTA & Helder VASCONCELOS, 2003. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," Economics Working Papers ECO2003/23, European University Institute.
  4. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
  5. 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.
  6. Nilssen, Tore & Sorgard, Lars, 1998. "Sequential horizontal mergers," European Economic Review, Elsevier, vol. 42(9), pages 1683-1702, November.
  7. 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.
  8. Fridolfsson, Sven-Olof, 2007. "Anti- versus Pro-Competitive Mergers," Working Paper Series 694, Research Institute of Industrial Economics.
  9. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
  10. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  11. Norbäck, Pehr-Johan & Persson, Lars, 2002. "Cross-Border Acquisitions and Greenfield Entry," Working Paper Series 570, Research Institute of Industrial Economics.
  12. 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.
  13. 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.
  14. 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.
  15. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  16. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
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Citations

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Cited by:
  1. 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.
  2. 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.
  3. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
  4. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Discussion Paper 2014-006, Tilburg University, Center for Economic Research.
  5. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.
  6. 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.

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