Cross-Border Price Effects of Mergers and Acquisitions -- A Quantitative Framework for Competition Policy

Konferenzbeitrag

Decisions of national competition authorities have important effects on other jurisdictions. We provide a framework to quantify the domestic and cross-border effects of mergers, and to draw conclusions for the coordination of national merger policies. We develop a two-country model with many sectors. In each sector, producers vary in terms of their marginal costs, and are engaged in Cournot competition. We allow for profitable mergers to take place subject to the non-violation of a given national competition policy. Because of trade costs and perceived differences in qualities between domestic and foreign products, mergers may have different consumer surplus effects in the home and the foreign country. We calibrate the model using data for the year 2002 for 167 manufacturing sectors in the U.S. and Canada. We choose parameters to match relevant moments in the data, including industry sales, concentration ratios and trade flows. We find that in the majority of industries a merger approval policy based on domestic consumer surplus is too restrictive from the viewpoint of the neighboring country. We also show that adopting a supra-national policy that approves a merger if and only if it increases the sum of consumer surplus in the two countries would lead to significant gains for U.S. consumers but hurt consumers in Canada. These results highlight the difficulties in coordinating national competition policies in a way acceptable to all participating countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Mergers and Competition Policy ; No. B13-V3

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Antitrust Policy and Public Enterprises, Nonprofit Institutions, and Professional Organizations ; Oligopoly and Other Imperfect Markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Breinlich, Holger ; Nocke, Volker ; Schutz, Nicolas
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/79837
• Last update: 10.03.2025, 11:43 AM CET