Sequential Cross‐border Mergers in Models of Oligopoly

Anti‐competitive mergers may be held up when outside firms respond pro‐competitively. I examine the profitability of cross‐border mergers by embedding a class of oligopoly models—where mergers are anti‐competitive and actions are strategic substitutes—in a sequential merger game, cast in a two‐country setting. I find that cross‐border mergers: (i) are held up only when ‘international differences’ are minimal; (ii) happen in clusters, not in isolation; and (iii) can be interdependent. I illustrate with two standard oligopolies. The ‘bumpiness’ of the world suggests that the hold‐up problem is less pervasive in an open‐economy context.