Cross-border mergers and national champions in an integrating economy

Arbeitspapier

We introduce a simple oligopolistic trade model with international transportation costs, and analyze the profitability and the social desirability of national vs. international mergers in relation to three different issues, (i) the level of trade freeness, (ii) the possibility of rent appropriation on world markets, and (iii) direct synergy effects of mergers. Cross-border M&A is privately and socially more attractive than domestic mergers. National competition policy may be too permissive towards M&A, because it does not take into account the negative impact of decreasing competition on world consumer surplus. We also discuss the normative implications of national champions. The promotion of national mergers can be in the interest of individual countries if rent extraction possibilities are strong enough, but global welfare is adversely affected.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 2220

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Multinational Firms; International Business ; Oligopoly and Other Imperfect Markets ; Industrial Policy; Sectoral Planning Methods
• Subject: mergers ; national champions ; international trade ; economic integration

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Suedekum, Jens
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/33940
• Last update: 10.03.2025, 11:43 AM CET