Cross-border Merger, Vertical Structure, and Spatial Competition

Beladi, Hamid and Chakrabarti, Avik and Marjit, Sugata (2010): Cross-border Merger, Vertical Structure, and Spatial Competition.

Abstract

This analysis is a natural follow up of continued efforts to assess the consequences of cross-border mergers in industries with a vertical structure. Absent free trade, in a vertically related industry, the downstream firms will not choose the social optimum under spatial price discrimination when none of the downstream firms produce all the varieties that consumers demand. We show that free trade will induce the downstream firms to gravitate toward the social optimum but an upstream merger across borders, under free trade, will pull the downstream firms away from the social optimum back to their autarkic positions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Product-differentiation, Price-discrimination, Spatialcompetition, Firm-location, Cross-border Merger
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

References

Amador, J., Cabral, S., 2009. Vertical specialization across the world: A relative measure. North American Journal of Economics and Finance 20, 267-80.

Arozamena, L., Weinschelbaum, F., 2009. Simultaneous vs. sequential price competition with incomplete information. Economics Letters 104, 23-26.

Beladi, H., Chakrabarti, A., Marjit, S., 2010a. Sequential spatial competition in vertically related industries with different product varieties, Economics Letters 106, 112-115.

Beladi, H., Chakrabarti, A., Marjit, S., 2010b. Cross-Border horizontal mergers in vertically related industries, mimeo.

Beladi, H., Chakrabarti, A., Marjit, S., 2008. Vertical mergers and downstream spatial competition with different product varieties, Economics Letters 101, 262-264.

Braid, R.M., 2008. Spatial price discrimination and the locations of firms with different product selections or product varieties. Economics Letters 98, 23-26.

Dasgupta, P., Maskin, E., 1986. The existence of equilibrium in discontinuous economic games, II: Applications. Review of Economic Studies 53, 27-41.

Haller, S. A., 2009. The impact of multinational entry on domestic market structure and investment. International Review of Economics and Finance 18, 52-62.

Hoover, E.M., 1937. Spatial price discrimination. Review of Economic Studies 4, 182-191.

Hotelling, H., 1929. Stability in competition. Economic Journal 39, 41-57.

Klomp, J., 2010. Causes of banking crises revisited. North American Journal of Economics and Finance 21, 72-87.

Kurata, H., Ohkawa, T., Okamura, M., 2009. Location choice, competition, and welfare in non-tradable service FDI. International Review of Economics and Finance 18, 20-25.

Lafontaine, F., Slade, M., 2007. Vertical Integration and firm boundaries: The evidence. Journal of Economic Literature 45, 629-85.

Lahiri, S., 2009. Foreign direct investment: An overview of issues. International Review of Economics and Finance 18, 1-2.

Lerner, A., Singer, H., 1937. Some notes on duopoly and spatial competition. Journal of Political Economy 45, 145- 186.

Maskin, E., Riley, J. 1984. Optimal auctions with risk averse buyers. Econometrica 52, 1473-1518.

Neary, P., 2007. Cross-border mergers as instruments of comparative advantage. Review of Economic Studies 4, 182- 191.

Raff, H. Ryan, M., Stähler, F., 2009. The choice of market entry mode: Greenfield investment, M&A and joint venture. International Review of Economics and Finance 18, 3-10.