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Cross-Border Merger Waves

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  • Vasconcelos, Helder
  • Fumagalli, Eileen

Abstract

This paper proposes a sequential merger formation game with cost synergies to study how trade policy can influence firms' choice between domestic and cross-border mergers in an international Cournot oligopoly. 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. We also analyze how the equilibrium market structures are affected by the presence of lobbying efforts.

Suggested Citation

  • Vasconcelos, Helder & Fumagalli, Eileen, 2006. "Cross-Border Merger Waves," CEPR Discussion Papers 5601, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5601
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    References listed on IDEAS

    as
    1. Ramon Fauli‐Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, June.
    2. Ramon Fauli‐Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, June.
    3. 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.
    4. Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
    5. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1229-1257.
    6. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    7. Nilssen, Tore & Sorgard, Lars, 1998. "Sequential horizontal mergers," European Economic Review, Elsevier, vol. 42(9), pages 1683-1702, November.
    8. Pedro P. Barros & Steffen H. Hoernig, 2018. "Sectoral Regulators and the Competition Authority: Which Relationship is Best?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 451-472, May.
    9. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
    10. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    11. Alberto Salvo, 2004. "A General Analysis of Sequential Merger Games with an Application to Cross-Border Mergers," STICERD - Economics of Industry Papers 36, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    12. Inés Macho-Stadler & David Pérez-Castrillo & Nicol? Porteiro, 2002. "Sequential Formation of Coalitions through Bilateral Agreements," UFAE and IAE Working Papers 515.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    13. Helder Vasconcelos, 2005. "Tacit Collusion, Cost Asymmetries, and Mergers," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 39-62, Spring.
    14. 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. Alberto Salvo, 2010. "Sequential Cross‐border Mergers in Models of Oligopoly," Economica, London School of Economics and Political Science, vol. 77(306), pages 352-383, April.
    2. Ray Chaudhuri, A., 2011. "Cross-Border Mergers and Market Segmentation (Replaces CentER DP 2010-096)," Discussion Paper 2011-112, Tilburg University, Center for Economic Research.

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    More about this item

    Keywords

    Endogenous mergers; Merger waves; Tariff-jumping fdi;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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