Working Paper: CEPR ID: DP10851
Authors: Holger Breinlich; Volker Nocke; Nicolas Schutz
Abstract: In a two-country international trade model with oligopolistic competition, we study the conditions on market structure and trade costs under which a merger policy designed to benefit domestic consumers is too tough or too lenient from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the U.S. and Canada. Our results suggest that at present levels of trade costs, merger policy is too tough in the vast majority of sectors. We also quantify the resulting externalities and study the impact of different regimes of coordinating merger policies at varying levels of trade costs.
Keywords: international trade; merger policy; mergers and acquisitions; oligopoly; trade policy
JEL Codes: F12; F13; L13; L44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conflict statistic (ratio of domestic to foreign pre-merger prices adjusted for trade costs) > 1 (F14) | merger control too tough for foreign consumers (F23) |
| conflict statistic (ratio of domestic to foreign pre-merger prices adjusted for trade costs) < 1 (F14) | merger control too lenient for foreign consumers (L49) |
| trade costs decrease (F19) | importance of veto rights over foreign mergers increases (G34) |
| trade costs and initial market structures (F12) | differences in market power (L11) |
| differences in market power (L11) | conflicts in merger control decisions (L49) |
| conflict statistic (ratio of domestic to foreign pre-merger prices adjusted for trade costs) (F14) | overall consumer surplus in both countries (F61) |