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The Impact of Firm Size and Market Size Asymmetries on National Mergers in a Three-Country Model

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Author Info
Santos-Pinto, Luís

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Abstract

This paper studies the impact of firm and market size asymmetries on merger decisions. To do that I consider a model where a small and a large country compete in a third (world) market. Each of the two countries has two firms (with potentially different costs) that supply the domestic market and export to the third market. Merger decisions in the two countries are modeled as a simultaneously move game. The paper finds that firms in the large country have more incentives to merge than firms in the small country. In contrast, the government of the large country has more incentives to block a merger than the government of the small country. Thus, the model predicts that conflicts of interest between governments and firms concerning national mergers are more likely in large countries than in small ones.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17166.

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Date of creation: 26 Aug 2009
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Handle: RePEc:pra:mprapa:17166

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Related research
Keywords: International Trade; Merger Policy; Size Asymmetry;

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Find related papers by JEL classification:
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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  1. Barros, Pedro Pita, 1998. "Endogenous mergers and size asymmetry of merger participants," Economics Letters, Elsevier, vol. 60(1), pages 113-119, July. [Downloadable!] (restricted)
  2. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February. [Downloadable!] (restricted)
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  3. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May. [Downloadable!] (restricted)
  4. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  5. Jens Südekum, 2008. "Cross-Border Mergers and National Champions in an Integrating Economy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 477-508, September. [Downloadable!] (restricted)
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  6. Steffen Huck & Kai A. Konrad, 2004. "Merger Profitability and Trade Policy," Scandinavian Journal of Economics, Blackwell Publishing, vol. 106(1), pages 107-122, 03. [Downloadable!] (restricted)
  7. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September. [Downloadable!] (restricted)
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  8. 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. [Downloadable!] (restricted)
  9. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March. [Downloadable!] (restricted)
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  10. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December. [Downloadable!] (restricted)
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  11. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter. [Downloadable!] (restricted)
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