Sequential cross-border mergers

Eileen Fumagalli, Helder Vasconcelos*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)

Abstract

This paper proposes a sequential merger formation game to study how trade policy can influence firms' choice between intra-national and cross-border mergers in an international Cournot oligopoly with a cost structure à la Perry and Porter [Perry, M. and Porter, R.H., 1985. Oligopoly and the Incentive for Horizontal Merger. American Economic Review 75(1), 219-227.]. We find that the equilibrium market structure depends heavily on: (i) the level of trade costs; and (ii) whether or not active antitrust authorities are incorporated within the sequential merger game. In addition, it is shown that whenever mergers occur in equilibrium, they occur in waves and the merger wave comprises at least one cross-border merger.

Original languageEnglish
Pages (from-to)175-187
Number of pages13
JournalInternational Journal of Industrial Organization
Volume27
Issue number2
DOIs
Publication statusPublished - Mar 2009

Keywords

  • Endogenous mergers
  • Endogenous split of surplus
  • Merger policy
  • Tariff-jumping FDI

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