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Environmental policy helping antitrust decisions: Socially excessive and insufficient merger approvals

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  • Choi, Pak-Sing
  • Espínola-Arredondo, Ana
  • Muñoz-García, Félix

Abstract

This paper considers firms’ incentives to merge under imperfect competition, where we allow for product differentiation, cost asymmetries, and pollution intensities (green and brown goods). We first analyze mergers in the absence of environmental regulation, showing that mergers induce an output shift towards the lowest cost firm. When emission fees are introduced, however, firms also consider their relative pollution intensities, potentially reverting the above output shift. We show that socially excessive mergers can arise when firms shift output to the more cost-efficient firm which may cause more pollution. In contrast, socially insufficient mergers can arise if output shifts reduce pollution.

Suggested Citation

  • Choi, Pak-Sing & Espínola-Arredondo, Ana & Muñoz-García, Félix, 2022. "Environmental policy helping antitrust decisions: Socially excessive and insufficient merger approvals," Resource and Energy Economics, Elsevier, vol. 67(C).
  • Handle: RePEc:eee:resene:v:67:y:2022:i:c:s092876552100052x
    DOI: 10.1016/j.reseneeco.2021.101267
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    Cited by:

    1. Hu, Jun & Fang, Qi & Wu, Huiying, 2023. "Environmental tax and highly polluting firms' green transformation: Evidence from green mergers and acquisitions," Energy Economics, Elsevier, vol. 127(PB).
    2. Ibrahim Y. Tawbe & Jihad Elnaboulsi, 2024. "Maternal residential proximity to the most polluting facilities and birth weight in France," Working Papers 2024-15, CRESE.
    3. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Wassim Daher & Jihad Elnaboulsi & Mahelet G. Fikru & Luis Gautier, 2024. "An Analysis of Mergers in the Presence of Uncertainty in Renewable Energy Integration Costs," Working Papers 2024-14, CRESE.

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    More about this item

    Keywords

    Socially excessive/insufficient mergers; Product differentiation; Cost asymmetry; Pollution intensity; Emission fees; Antitrust authorities; Environmental regulation;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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