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Are Big Mergers Welfare Enhancing When There Is Environmental Externality?

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

Previous studies find that horizontal merger deals that consolidate a majority of firms in the market are likely to reduce welfare. This chapter provides an in-depth analysis of the relationship between the size of a merger and welfare in industries with environmental externality. In an international framework we show that in a market where more than 50-percent of firms have merged, a further increase in the size of the merger could increase or decrease welfare depending on two previously unexplored factors: (i) a given threshold of size of a merger and (ii) the pollution intensity of firms. Furthermore, we show that the relationship between welfare and size of merger can be affected by an exogenous change in emission tax at home and in a foreign country.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:nrmchp:978-3-031-63549-6_8
    DOI: 10.1007/978-3-031-63549-6_8
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    Cited by:

    1. is not listed on IDEAS
    2. 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.
    3. Yingying Xu & Wen Wang & Honggui Gao & Huaxiong Zhu, 2024. "The Impact of Green Mergers and Acquisitions on Corporate Environmental Performance: Evidence from China’s Heavy-Polluting Industries," Sustainability, MDPI, vol. 16(9), pages 1-24, April.
    4. Luis Gautier & Mahelet G. Fikru, 2024. "Welfare Impact of New Firm Acquisition," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 105-132, Springer.
    5. 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).
    6. 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).
    7. 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).
    8. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Daher, Wassim & Elnaboulsi, Jihad & Fikru, Mahelet G. & Gautier, Luis, 2025. "An analysis of mergers in the presence of uncertainty in renewable energy integration costs," Energy Economics, Elsevier, vol. 150(C).
    10. Erdős, Katalin & Baczur, Roland & Kehl, Dániel & Farkas, Richárd, 2022. "When post-merger price effect becomes smoothed over time: A case of a gasoline market merger," Energy Economics, Elsevier, vol. 105(C).

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