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Mergers in Cournot Markets with Environmental Externality and Product Differentiation

In: Handbook of Merger Control and Environmental Policy

Author

Listed:
  • Luis Gautier

    (Universidad de Málaga, Departamento de Teoría e Historia Econòmica)

  • Mahelet G. Fikru

    (Missouri University of Science and Technology)

Abstract

Due to the extensive work on why mergers take place, our understanding of merger incentives has improved. However, there are not many studies examining how differences in pollution parameters between post- and pre-merger markets affect the attractiveness of merger deals. This chapter examines conditions under which the attractiveness of a merger deal increases in a Cournot market with product differentiation and environmental externality. Our findings suggest that (i) the attractiveness of a deal increases as products become more differentiated, (ii) merger deals could result in lower optimal emission tax post-merger, (iii) the attractiveness of a deal is more likely to increase if the merged entity is not too pollution-intensive post-merger relative to its pre-merger pollution intensity; and (iv) when merged entities modify products to be greener, they are more likely to benefit more from the deal if they are not too pollution-intensive.

Suggested Citation

  • Luis Gautier & Mahelet G. Fikru, 2024. "Mergers in Cournot Markets with Environmental Externality and Product Differentiation," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 21-46, Springer.
    • Handle: RePEc:spr:nrmchp:978-3-031-63549-6_2
    DOI: 10.1007/978-3-031-63549-6_2
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    Cited by:

    1. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho & Park, Chul-Hi, 2024. "Merger incentive and strategic corporate social responsibility by a multiproduct corporation," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 193-206.
    2. Flavio M. Menezes & Jorge Pereira, 2023. "Imperfect competition, emissions tax and the Porter hypothesis," Australian Institute for Business and Economics DP022023, School of Economics, University of Queensland, Australia.
    3. Luis Gautier & Mahelet G. Fikru, 2024. "Are Big Mergers Welfare Enhancing When There Is Environmental Externality?," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 145-173, Springer.
    4. Fikru, Mahelet G & Ahmed, Bruktawit & Daher, Wassim, 2025. "Characterizing Optimal Decarbonization Policies and Evaluating Variability," OSF Preprints t2bzw_v1, Center for Open Science.
    5. Luis Gautier & Mahelet G. Fikru, 2024. "Cross-Country Emission Tax Effect of Mergers," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 207-223, Springer.
    6. Johansson, Eleanor & Norbäck, Pehr-Johan & Persson, Lars, 2025. "Why a Tariff War May Not Decrease Global CO2 Emissions," Working Paper Series 1526, Research Institute of Industrial Economics.
    7. Luis Gautier & Mahelet G. Fikru, 2024. "The Design of Emission Taxes in Markets with New Firm Acquisitions," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 225-243, Springer.
    8. 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).
    9. Pak-Sing Choi & Ana Espinola-Arredondo & Felix Munoz, 2020. "Mergers as an environmental ally: Socially excessive and insufficient merger approvals," Working Papers 2020-1, School of Economic Sciences, Washington State University.
    10. Chen, Shi & Zhao, Yonghong & Chang, Chuen-Ping & Lin, Jyh-Horng & Chang, Ching-Hui, 2024. "Vertical acquisition and carbon capture and storage choices under cap-and-trade regulation with sustainable finance," Energy Economics, Elsevier, vol. 139(C).
    11. Fikru, Mahelet G. & Ahmed, Bruktawit & Daher, Wassim, 2025. "Optimal policies for decarbonization via carbon capture: Tax, subsidize, or both?," Economic Modelling, Elsevier, vol. 153(C).
    12. 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).
    13. Jihad C. Elnaboulsi & Wassim Daher & Yiğit Sağlam, 2023. "Environmental taxation, information precision, and information sharing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 301-341, April.
    14. Luis Gautier & Mahelet G. Fikru, 2024. "Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 185-206, Springer.
    15. Chuyuan Zhang & Sang‐Ho Lee, 2023. "Foreign passive ownership and tariff‐induced free technology transfer under vertical integration," Manchester School, University of Manchester, vol. 91(2), pages 89-117, March.
    16. Sumi Cho & Sang-Ho Lee, 2025. "Strategic merger decisions under environmental corporate social responsibility," Economics Bulletin, AccessEcon, vol. 45(3), pages 1397-1405.

    More about this item

    JEL classification:

    • L - Industrial Organization
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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