National vs. international welfare effects of horizontal mergers
Empirical evidence suggests that many mergers do not increase profits of the participating firms and decrease welfare. Due to the globalization of markets we should take an international view on mergers and their welfare effects. This paper develops a Bertrand-model of an international heterogeneous market. It shows that there are neither positive incentives to merge nor positive international welfare effects from a merger if there are no positive synergy effects. Furthermore, it shows that national welfare effects are bigger than international ones when there are many domestic firms relative to domestic demand.
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- Farrell, J. & Shapiro, C., 1988.
"Horizontal Mergers: An Equilibrium Analysis,"
17, Princeton, Woodrow Wilson School - Discussion Paper.
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