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Mergers in Nonrenewable Resource Oligopolies and Environmental Policies

Author

Listed:
  • Hassan BENCHEKROUN
  • Michèle BRETON
  • Amrita RAY CHAUDHURI

Abstract

We examine the profitability of horizontal mergers within nonrenewable resource industries, which account for a large proportion of merger activities worldwide. Each firm owns a private stock of the resource and uses open loop strategies when choosing its extraction path. We analytically show that even a small merger (merger of 2 firms) is always profitable when the resource stock owned by each firm is small enough. In the case where pollution is generated by the industry’s activity, we show that an environmental policy that increases firms’ production cost or reduces the price received by firms can deter a merger. This speeds up the industry’s extraction and thereby causes emissions to occur earlier than under a laissez-faire scenario.

Suggested Citation

  • Hassan BENCHEKROUN & Michèle BRETON & Amrita RAY CHAUDHURI, 2018. "Mergers in Nonrenewable Resource Oligopolies and Environmental Policies," Cahiers de recherche 18-2018, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    • Handle: RePEc:mtl:montec:18-2018
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    Cited by:

    1. is not listed on IDEAS
    2. 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.
    3. 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).
    4. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    5. 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.
    6. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.
    7. Colombo, Luca & Labrecciosa, Paola & Simon, Leo K., 2023. "Too many or too few? On the optimal number of firms in the commons," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).

    More about this item

    JEL classification:

    • Q39 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Other
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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