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A Political Economy Model of Merger Policy in International Markets

  • MASSIMO MOTTA
  • MICHELE RUTA

This paper looks at the political economy of merger policy under autarky and in international markets. We assume that merger policy is decided by antitrust authorities (whose objective is to maximize welfare) but can be influenced by governments, which are subject to lobbying by the firms (be they insiders or outsiders to the merger). We argue that political economy distortions may explain some of the recently observed merger policy conflicts between authorities and politicians, as well as between institutions belonging to different countries. We illustrate our analysis with applications motivated by recent merger cases, which have been widely debated in the international press.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 79 (2012)
Issue (Month): 313 (01)
Pages: 115-136

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Handle: RePEc:bla:econom:v:79:y:2012:i:313:p:115-136
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  1. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  2. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2007. "The Political Economy of European Merger Control: Evidence using Stock Market Data," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 455-489.
  3. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
  4. Damien J. NEVEN & Lars-Hendrik RÖLLER, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.24, Université de Lausanne, Faculté des HEC, DEEP.
  5. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
  6. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  7. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  8. repec:cup:cbooks:9780521816632 is not listed on IDEAS
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