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Oxford Economic Papers Advance Access published online on December 17, 2007
Oxford Economic Papers, doi:10.1093/oep/gpm046
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© Oxford University Press 2007 All rights reserved

Merger policy to promote ‘global players’? A simple model

Andreas Haufler* and Søren Bo Nielsen{dagger}

*Department of Economics, University of Munich, Akademiestr. 1/II, D-80799 Munich, Germany; e-mail: Andreas.Haufler{at}lrz.uni-muenchen.de
{dagger}Department of Economics, Copenhagen Business School, Porcelaenshaven 16A, 1, DK-2000 Frederiksberg, Denmark; e-mail: sbn.eco{at}cbs.dk

JEL classifications: L41, F13, H77


  Abstract

We use a simple framework where firms in two countries serve their respective domestic markets and a world market to analyse under which conditions cost-reducing mergers will be beneficial for the merging firms, the home country, and the world as a whole. For a national merger, the policies enacted by a national merger authority tend to be overly restrictive from a global efficiency perspective. In contrast, all international mergers that benefit the merging firms will be cleared by either a national or a regional regulator, and this laissez-faire approach is also globally efficient. Finally, we allow for multiple mergers and analyse whether national mergers, international mergers or no mergers will be the equilibrium market structure when the firms' decisions to merge are either taken non-cooperatively or cooperatively.


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