Merger Policy in a Quantitative Model of International Trade

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 either too tough or too lenient, from the viewpoint of the foreign country. We calibra...

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Bibliographic Details
Published in:The Economic journal (London) 2020-02, Vol.130 (626), p.393-421
Main Authors: Breinlich, Holger, Nocke, Volker, Schutz, Nicolas
Format: Article
Language:English
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Summary: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 either too tough or too lenient, from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the USA 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 co-ordinating merger policies at varying levels of trade costs.
ISSN:0013-0133
1468-0297
DOI:10.1093/ej/uez061